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What is the difference between option volume and open interest?

Like stocks, options contract volume displays that day’s activity, whereas open interest is thetotal number of contracts outstanding. Options traders must consider both volume and open interest because the two data points tell different stories. Option open interest increases when traders create new contracts that did not previously exist.

How do you use open interest?

One way to use open interest is to look at it relative to the volume of contracts traded. 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.

What are daily trading volume and open interest?

Daily trading volume and open interest are two additional key numbers to watch when trading options. Understanding these two numbers can help you make better-informed investment decisions. Trading volume is the number of shares or contracts traded in a given period.

What does a high volume and high open interest mean?

Generally speaking, a high volume and high open interest both indicate aliquid market with many buyers and sellers for a particular option. Changes in open interest and volume can also be used to confirm market sentiment.

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