OI explained
- Thread starter Talon
- Start date
- Tags open interest
Nope, that not correct. Before going to the correct definition of volumes and open interest, let us understand that both these terms viz. 'Volume' and 'Open interest' are applicable to both futures as well as options.
Volume = No. of shares transacted over a period(ex: day).
If trader A sells 1 share to trader B, the volume is recorded as 1. If Trader B sells his 1 share to trader C, then the volume count increments to 2.
Open interest = No. of outstanding contracts for a particular contract(Future/option, strike price, expiry, underlying)
If trader A sell an option contract to trader B, then volume is recorded as 1(explained above) and Open Interest increases to 1. If trader B sells his option to trader C, the volume increments to 2 but Open Interest remains at 1.
Open interest changes only when positions are added/closed, irrespective of the no. of trades.
However, volume increases irrespective of change of open interest as and when the contract is traded.
I hope you got the point.
Volume = No. of shares transacted over a period(ex: day).
If trader A sells 1 share to trader B, the volume is recorded as 1. If Trader B sells his 1 share to trader C, then the volume count increments to 2.
Open interest = No. of outstanding contracts for a particular contract(Future/option, strike price, expiry, underlying)
If trader A sell an option contract to trader B, then volume is recorded as 1(explained above) and Open Interest increases to 1. If trader B sells his option to trader C, the volume increments to 2 but Open Interest remains at 1.
Open interest changes only when positions are added/closed, irrespective of the no. of trades.
However, volume increases irrespective of change of open interest as and when the contract is traded.
I hope you got the point.
1. When open interest starts to flatten after a rise in both price and open interest, it is a warning sign that the peaks have been reached.
2. When open interest is high, the market is at record highs and there is a sudden drop in prices, it is a bearish sign. This is an indication of a reversal of trends. This is because traders who came into the market when it was rising could square off positions at the hint of a fall, leading to a downward spiral.
3. Open interest at record high in a bull market is another warning sign.
2. When open interest is high, the market is at record highs and there is a sudden drop in prices, it is a bearish sign. This is an indication of a reversal of trends. This is because traders who came into the market when it was rising could square off positions at the hint of a fall, leading to a downward spiral.
3. Open interest at record high in a bull market is another warning sign.
| Thread starter | Similar threads | Forum | Replies | Date |
|---|---|---|---|---|
|
Quantitative Easing Explained... | General Trading & Investing Chat | 0 | |
|
Unexplained charges. | Equities | 6 | |
| A | Dynamic trader trading system explained ... immediate help needed to develope fomulla | AmiBroker | 134 | |
| A | Elliot wave rule explained | Technical Analysis | 1 | |
|
The fInanacial Crisis Explained | General Chit Chat | 0 |
Similar threads
-
-
-
Dynamic trader trading system explained ... immediate help needed to develope fomulla
- Started by Abu_Hady
- Replies: 134
-
-