What Is Open Interest? | How Do Options Work?

Open interest is the total number of options contracts in a particular series (one underlying, strike, expiration, and type) that are still open: bought and written but not yet closed, exercised, or expired. It is counted by the clearing house and usually updated once a day, before the market opens.

In short: volume counts how many contracts traded today; open interest counts how many are still outstanding. A high open interest generally means a series is widely held and often easier to trade, but it says nothing about whether the holders are bullish or bearish.

How open interest changes

Every trade has a buyer and a seller, and each side is either opening or closing a position.

Buyer is	Seller is	Effect on open interest
Opening	Opening (a new writer)	Rises by the number of contracts
Opening	Closing (selling a long)	No change
Closing (buying back a short)	Opening	No change
Closing	Closing	Falls

A worked example

The Maple Widgets Inc. (a hypothetical company) $50 call expiring next month starts Monday with open interest of 1,200.

Monday: 300 contracts trade. 200 are new positions on both sides, and 100 are one trader selling to close while another buys to open. Open interest rises by 200, to 1,400. Volume was 300.
Tuesday: 150 contracts trade, all with both sides closing. Open interest falls to 1,250.

Volume can exceed open interest on busy days, which is normal: the same contracts can change hands many times.

Open interest vs volume

	Volume	Open interest
Measures	Contracts traded during the session	Contracts outstanding
Resets	Every day	Carries over until positions close
Updated	During the day	Typically once a day

Both appear as columns on an options chain, explained in how to read an options chain.

What it can and cannot tell you

It can suggest liquidity. Series with large open interest often have tighter bid-ask spreads, which lowers the cost of getting in and out. That is a tendency, not a rule; check the actual quote.

It cannot tell you direction. Every open contract has a long and a short. A large open interest in a put could be buyers hedging, writers collecting premium, or both.

It matters near expiration. Large open interest at a strike close to the stock price on expiration day raises the chance of uncertain exercise and assignment, a problem covered in what happens at expiration.

Where the number comes from

In the US, open interest is tracked by the Options Clearing Corporation, which stands behind every listed contract. In Canada, the Canadian Derivatives Clearing Corporation does the same for Montreal Exchange options. Their role is explained in how options markets work.