Open interest ......

NOMINDTR

Well-Known Member
#2
Dear assaraf,

Open interest is the total open positions that are not closed, not squared off in futures and options (Derivatives) market.

At the end of each trading day, the open interest is calculated. Say if there is a new buyer comes to market and buys futures of XYZ scrip, then, open interest of XYZ is added by the value 1. If a person who has open position on XYZ scrip, in derivatives market, and if he closed the position, then XYZ's open interest is decreased by 1.

Say if a trader A buys a contract from a trader B the open interest added by 1. The next day if a trader C buys 2 contracts from a trader D, the open interest added by 2. The next day, if the trader A unwinding his or her position of 1 lot, open interest decreased by 1 if his or her counter party is either B or D. If the counter party of A is a new trader E, then open interest is unchanged as a new entrant E holds the position.

To put it simple, open interest is the open position in derivatives market at the end of a trading day. Observing open interest could give you some clue on the market (if you consider open interest of Nifty) or a stock. If the stock is moving up and you find a decrease in open interest, it shows the weakness of current trend (either upward or downward) you can expect the trend change. If open interest increases, it would support current trend, or current direction of the market or the stock.

Hope I have not confused you. Ask me if you have anything specific to know.

Regards
 
Last edited:
#3
Dear assaraf,

Open interest is the total open positions that are not closed, not squared off in futures and options (Derivatives) market.

At the end of each trading day, the open interest is calculated. Say if there is a new buyer comes to market and buys futures of XYZ scrip, then, open interest of XYZ is added by the value 1. If a person who has open position on XYZ scrip, in derivatives market, and if he closed the position, then XYZ's open interest is decreased by 1.

Say if a trader A buys a contract from a trader B the open interest added by 1. The next day if a trader C buys 2 contracts from a trader D, the open interest added by 2. The next day, if the trader A unwinding his or her position of 1 lot, open interest decreased by 1 if his or her counter party is either B or D. If the counter party of A is a new trader E, then open interest is unchanged as a new entrant E holds the position.

To put it simple, open interest is the open position in derivatives market at the end of a trading day. Observing open interest could give you some clue on the market (if you consider open interest of Nifty) or a stock. If the stock is moving up and you find a decrease in open interest, it shows the weakness of current trend (either upward or downward) you can expect the trend change. If open interest increases, it would support current trend, or current direction of the market or the stock.

Hope I have not confused you. Ask me if you have anything specific to know.

Regards
tnx ...... i get a rough idea........... can u giv me answrs for d following ....?

is we get any clue ..... the price of a particualr stock will either rise or decline if we observing its open interest...........????
 

NOMINDTR

Well-Known Member
#4
tnx ...... i get a rough idea........... can u giv me answrs for d following ....?

is we get any clue ..... the price of a particualr stock will either rise or decline if we observing its open interest...........????
Keep it only a rough idea :)

Yes it could give clues and always expect surprises in the market, as analyzing open interest could be more than what one mean. That's why I said keep it only a rough idea. I don't know about the scope of your home work, still, you can consider Open Interest if you find it appropriate.


Happy Trading
 
#6
some time open interest is not even number. If there is extra buy or sell position in market, I want to know how is it possible ? plz reply
 

NOMINDTR

Well-Known Member
#7
some time open interest is not even number. If there is extra buy or sell position in market, I want to know how is it possible ? plz reply
Dear friend,

May be I am bit slow..I am afraid I don't get you
 

AW10

Well-Known Member
#8
some time open interest is not even number. If there is extra buy or sell position in market, I want to know how is it possible ? plz reply
What makes u feel that open interest will always be an even number (ie. divisible by 2).
When first trade is done i.e OI starts with 1. Though there are 2 parties involved i.e a buyer and a seller but that doesn't indicate that 2 contracts are traded.. It is still only 1 contract traded which had a buyer and a seller.

Hope I understood correctly and clarified your doubt. Else please reword your question and post it again.

Happy Trading.
 
#9
Dear assaraf,

Open interest is the total open positions that are not closed, not squared off in futures and options (Derivatives) market.

At the end of each trading day, the open interest is calculated. Say if there is a new buyer comes to market and buys futures of XYZ scrip, then, open interest of XYZ is added by the value 1. If a person who has open position on XYZ scrip, in derivatives market, and if he closed the position, then XYZ's open interest is decreased by 1.

Say if a trader A buys a contract from a trader B the open interest added by 1. The next day if a trader C buys 2 contracts from a trader D, the open interest added by 2. The next day, if the trader A unwinding his or her position of 1 lot, open interest decreased by 1 if his or her counter party is either B or D. If the counter party of A is a new trader E, then open interest is unchanged as a new entrant E holds the position.

To put it simple, open interest is the open position in derivatives market at the end of a trading day. Observing open interest could give you some clue on the market (if you consider open interest of Nifty) or a stock. If the stock is moving up and you find a decrease in open interest, it shows the weakness of current trend (either upward or downward) you can expect the trend change. If open interest increases, it would support current trend, or current direction of the market or the stock.

Hope I have not confused you. Ask me if you have anything specific to know.

Regards
openinterest does not always increase if a new buyer buys into the market.say a new buyer buys from a person who closes his position then the net effect in openinterest is zero.
openinterest=new buyer+ new seller.
 
#10
Dear assaraf,

Say if a trader A buys a contract from a trader B the open interest added by 1. The next day if a trader C buys 2 contracts from a trader D, the open interest added by 2. The next day, if the trader A unwinding his or her position of 1 lot, open interest decreased by 1 if his or her counter party is either B or D. If the counter party of A is a new trader E, then open interest is unchanged as a new entrant E holds the position.

Regards
how does market differentiate between trader A, Trader B, Trader C and Trader D. mean to say how do we differentiate that a buyer has bought the contract from existing holder or it is a totally new contract!
 

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