We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.


Key takeaways from this chapter

  1. Open Interest (OI) is a number that tells you how many contracts are currently outstanding (open) in the market.
  2. OI increases when new contracts are added. OI decreases when contracts are squared off.
  3. OI does not change when contracts are transferred from one party to another.
  4. Unlike volumes, OI is continuous data.
  5. On a stand-alone basis, OI and Volume information does not convey information; hence it makes sense always to pair it with the price to understand the impact of their variation.
  6. Abnormally high OI indicates high leverage. Beware of such situations.

18 comments

  1. Namrata says:

    Great video Team Zerodha! I went through the entire video series on ‘Futures’ and I must say you guys have done a fantastic job of explaining Futures. I had read about these concepts in books, articles and even some videos. But what differentiates your videos is clear information, simply and confidently presented by Prateek with excellent graphics. Take a bow guys!

  2. Hreyaan Mahesh says:

    I’m truly grateful to the content that your team is providing, great job!
    God bless y’all 🙂

  3. Pawez Khan says:

    Thanks for such a nice and simply explained video

  4. Vidya says:

    Hi Karthik,

    Can we Sell Futures if we don’t have the holdings, I mean short selling is allowed?

  5. Chiragkumar Patel says:

    How long it takes to update OI?

  6. Priya says:

    what’s the difference between low [OHLC] and lower circuit?

    • Karthik Rangappa says:

      A lower circuit is when the price hits a low price and freezes for the day. Lower circuit price is also the low price of the day.

  7. B Shinde says:

    Open interest for perticular strike price shown is it number of lots or number of units

  8. Rajesh says:

    Can you please explain in more detail, how does Open Interest(OI) decrease?
    Suppose, that A(call option seller) and B(call option buyer) enter into a contract, OI is 1. Now if after sometimes B sells this option to C(another call option buyer), shouldn’t the OI be 1 in this case as the contract is not squared off??
    How is the OI reduced actually, that is my doubt.

    • Karthik Rangappa says:

      Yes, in this case, the position has changed hands from B to C, and no new contract is created, hence OI will remain the same.

  9. Arjun says:

    Awesome content!

Post a comment