Open Interest Scan

Open Interest is the total number of outstanding contracts that are held by market participants at EOD or simply total number of contracts (futures/options) that have not been squared off, expired or fulfilled by delivery. Open interest is often used to confirm trends and trend reversals.

For each buyer/seller of contract there must be a seller/buyer for that contract. Both buyer and seller combine to create only one contract. Hence, to know the trend we need to determine the total OI from one side or the other and not the summation of both. OI shows the flow of money into particular stocks and into the market.  The OI number of contracts may increase or decrease and represented as positive or negative number.

How Open Interests are calculated:

  • Traders ¬†initiating a new position (one new buyer and one new seller) will increase OI by one contract
  • Traders ¬†closing an existing or open position (one old buyer and one old seller) will decrease OI by one contract
  • Old Trader passing off position to a new trader (one old buyer sells to one new buyer), will not change OI.

How does OI work in identifying trends:

So now as we know, increase in OI shows us that money is flowing into that particular stock/market. If OI is increasing for the continuing trend then it shows that the trend like up/down will continue in coming days as well.

Decrease in OI shows that contracts are being liquidated by traders (maybe after meeting the target or trend going against them) and there is high probability of trend reversals.

Here’s how OI can help you identify trends;

  • Open Interest Increasing with Price Increase indicates Bulls are in control for more upward move
  • Open Interest Increasing with Price Decrease indicates Bears are in control for more downward move
  • Open Interest Decreasing with Price Increase indicates Bulls are trying to take control for trend reversals towards upside
  • Open Interest Decreasing with Price Decrease indicates Bears are trying to take control for trend reversals towards downside

This scanning is based on Open Interest Analysis. Click on individual scans to know more.

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Long Cover

New Short

Short Cover

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