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What is trading volume & open interest?

Trading volume and open interest are two metrics used to describe activity and liquidity within the options market. Trading volume measures the number of options contracts traded during a specified period and open interest measures of the number of active options in the market at any time. What Is Trading Volume?

What is open interest?

Open interest isupdated daily and is typically displayed beside volume on an options chain. Investors can trade the same options contract multiple times (volume). When a new contract is traded, open interest increases. Open interest can increase or decrease before expiration. The difference between open interest and volume can be confusing.

What does it mean if a volume exceeds open interest?

When the volume exceeds the existing open interest on a given day, it suggests that trading in that option was exceptionally high that day. Open interest also gives you key information regarding the liquidity of an option. If there is no open interest in an option, there is no secondary market for that option.

What does a rising price with increasing volume and open interest mean?

For example, a rising price with increasing volume and open interest indicates that the market for an option isstrong, while a rising price with decreasing volume and open interest suggests a weak market. What Does It Mean When the Volume Is Higher Than the Open Interest?

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