The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone, Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Does open interest mean markets will go up or go down?” When it comes to options trading, the real question here is, “What does open interest tell us about the future direction of the market?” Now first, we need to define what open interest is. Really, it’s pretty simple when you think about open interest as opposed to volume. Volume in contract trading for options is just the number of contracts that were traded that day, so what is the volume, how many contracts changed hands. Open interest tells us how many contracts are still left open and working in the market. Now again, there’s got to be basically two parties to the transaction. There’s option buyers and option sellers. Both of these people would have net contracts open or still available in the market. Unlike stock which stock has a predefined amount of shares that you can trade or float, when those shares are traded, there’s