Open Interest (OI) refers to the total number of active, outstanding options contracts that are yet to be closed, exercised, or expired.
It represents how many contracts are currently open in the market for a specific strike price and expiry.
OI is one of the most important indicators in options analysis, as it gives insight into market activity, trader participation, and potential support/resistance zones.
Understanding Open Interest
Open interest is:
A cumulative measure — it increases when new contracts are created and decreases when contracts are closed
Specific to each strike price and expiry date
Updated in real-time as participants enter or exit positions
It shows how many contracts are live in the system, giving a clear picture of market commitment at each level.
How Open Interest Is Created and Changed
Action
Effect on OI
A buyer opens a new position and a seller writes a new contract
Increases (+1)
A buyer or seller closes an existing position (square off)
Decreases (–1)
Both buyer and seller square off existing positions
Decreases (–1)
A trade occurs between two existing open positions
No change
Key Point: OI reflects new capital entering or exiting the market.
It is not affected by simple ownership transfers.
Open Interest vs Volume
Metric
Definition
Behaviour
Volume
Number of contracts traded in a single day
Resets daily
Open Interest
Total number of outstanding contracts still open in the market
Accumulates over time
Volume = trading activity
OI = market participation
Both are used together to assess liquidity and momentum.
Example of Open Interest
Suppose OI for the Nifty 22,500 Call Option = 1,20,000
If 500 new contracts are added → OI becomes 1,20,500
If 1,000 existing contracts are closed → OI becomes 1,19,500
Thus, OI reflects net open positions, not total trades.
How Traders Use Open Interest
1. To Assess Liquidity
High OI → more active market, tighter spreads, easier entry/exit
Low OI → illiquid, wider spreads, harder to trade
2. To Gauge Market Sentiment (with Price)
Price Action
OI
Interpretation
Up
Up
Bullish build-up
Down
Up
Bearish build-up
Up
Down
Short-covering rally
Down
Down
Long unwinding or profit booking
3. To Identify Support and Resistance
High Call OI → Possible Resistance
High Put OI → Possible Support
Example:
Nifty highest Call OI at 23,000 → market may face resistance here
Highest Put OI at 22,500 → market may find support here
Where to See Open Interest
Most trading platforms show OI in the Option Chain
Data is strike-wise and expiry-wise
Change in OI shows where new positions are being built
Example:
Strike
OI
Change in OI
Price
22,000
95,000
+10,000
₹110
22,500
1,20,000
+15,000
₹65
23,000
1,60,000
+25,000
₹32
Here, the 23,000 strike has the highest OI → indicating strong resistance.
Key Takeaways
Open interest is the total number of outstanding option contracts still active.
It increases when new positions are opened and decreases when positions are closed or expire.
It is used to measure liquidity, market sentiment, and trader positioning.
Open interest is not the same as volume — volume resets daily, but OI is cumulative.
Traders use OI with price action and change in OI to interpret trend strength and possible reversal zones.