What Is the Concept of 'Open Interest' and How Does It Indicate Potential Options Liquidity? ▴ Learn

What Is the Concept of ‘Open Interest’ and How Does It Indicate Potential Options Liquidity?

Open interest is the total number of outstanding, unclosed contracts for a specific options series. It indicates the level of market participation and commitment to that contract.

High open interest suggests a strong existing base of traders, which generally correlates with higher liquidity, tighter spreads, and lower potential slippage. Low open interest suggests the opposite.

It is a forward-looking indicator of potential future liquidity.

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