Open Interest/Volume
- Thread starter .sigma
- Start date
Too much noise in the open interest.
How many exchanges is the option listed on and how much of the underlying trades can be a superior metric. It's just not a clean enough member in many cases to create a generalization. Obviously good OI can be good.
In the 1980s the CBOE traded a name TMX which was 0 open interest in many strikes, but you could get 10,000 options done at any time, because the stock was so liquid and it was multiply traded with quality MMs.
How many exchanges is the option listed on and how much of the underlying trades can be a superior metric. It's just not a clean enough member in many cases to create a generalization. Obviously good OI can be good.
In the 1980s the CBOE traded a name TMX which was 0 open interest in many strikes, but you could get 10,000 options done at any time, because the stock was so liquid and it was multiply traded with quality MMs.
If your newer to trading I think your better off not making to much of this for now. Just be aware that rising open interest with declining prices is bearish, this points to the commercials shorting it.
Open interest studies typically involve also factoring in the COT, contract spreads (nearest to the distant months), & most importantly the price action.
It can give you bit an edge for swing trading a few times a year but is highly subjective & difficult to use alone for timing trades. Price action is the most important element.
Open interest studies typically involve also factoring in the COT, contract spreads (nearest to the distant months), & most importantly the price action.
It can give you bit an edge for swing trading a few times a year but is highly subjective & difficult to use alone for timing trades. Price action is the most important element.
Last edited:
—I must ask, do you have any evidence of this (i.e.: in context of the open interest of equity options)?
I don’t know the answer but when I was learning options and sold some seemingly mispriced box spread on hard-to-borrow stocks, I soon regretted it when the stock shot up and I was assigned short stock with super-high overnight interest. That’s when someone pointed out to me that there is almost no open interest on those options, because they all get assigned.
(just a special case to consider)
For some reason I thought the OP was trading futures - my post deals with futures, not options which is a different animal since the commercial hedgers are not in the mix.
https://www.investopedia.com/ask/answers/050615/what-difference-between-open-interest-and-volume.asp
Y'know that olde aphorism about the blind wise men all describing an elephant by what they happen to be touching at the time? What if it were a *herd* of elephants?
"Open Interest" is meaningless. (Nearly.) If you want to discern something of value, then chart it by strike and by expiration. LOTS of things will pop out (and make you mutter, "Of *course*!")
(I apologize for not posting a chart right now -- I'm not near my work set-up.)
"Open Interest" is meaningless. (Nearly.) If you want to discern something of value, then chart it by strike and by expiration. LOTS of things will pop out (and make you mutter, "Of *course*!")
(I apologize for not posting a chart right now -- I'm not near my work set-up.)