What it is
Open interest represents the total number of derivative contracts that are active and have not been settled, offset, or expired. For each open contract, there is both a long position (buyer) and a short position (seller). When a new buyer and seller open a contract, open interest increases. Conversely, when an existing buyer and seller close out their positions, or when a contract expires or is delivered, open interest decreases. This metric provides a snapshot of the total capital committed to a particular derivative market.
In markets, rising open interest often indicates increasing liquidity and growing interest in an asset, suggesting new money is entering the market. Falling open interest can signal decreasing market participation or that existing positions are being closed. Traders use open interest alongside price movements to gauge market sentiment and potential price trends. For example, rising open interest during a price rally might confirm strong bullish momentum, while rising open interest during a price decline could signal strong bearish conviction.
Why it matters
Open interest helps gauge market liquidity and the strength of price trends, indicating whether new money is flowing in or out of a market.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice