Donald Thompson
The term open interest defines the total number of contracts open or not closed at the end of a trading day. The open interest is typically used in the futures market and can not be an exploitable indicator in real-time, unlike the volumes traded on the shares. The open interest represents the total of long or short contracts in the free market, not the sum of both; therefore, it constitutes the number of open contracts. This is because a contract must have both a buyer and a seller. The open interest data reported every day is followed by the positive or negative sign indicating the increase or decrease in contracts for that day. This happens even in Office Hotforex (สำนักงาน hotforex which is the term in Thai) These changes give analysts an indication of how the type of participation in the market changes and attributes its forecast value to open interest.
How Open Interest Works
Whenever you make a transaction on the futures market, the ‘ open interest may be affected in three ways: salt falls or remains unchanged. The first case is an increase in the OI (Open Interest) because the buyer buys a new position, and the seller sells in the open. Both begin a new position, and a new contract is born.
The second case is that of a buyer who opens a long and a seller who liquidates the old long position; one enters and the other exits; therefore, the OI remains unchanged as there is no variation in the number of contracts.
The third cause may be that of a buyer who closes an old short transaction against a seller who opens a new one. Also, there will be no variations in this case since one operator enters while the other exits.
The fourth and final case is that of two operators, both liquidating an old position and, in this case, the open interest decreases as the existing contracts decrease.
Thomas
