What Is Open Interest in Options?

The Short Answer

Open interest is the total number of outstanding options contracts (at a given strike and expiration) that have been opened but not yet closed, exercised, or expired. Unlike volume, which resets to zero each day and measures activity within that session, open interest is a running total that only changes when contracts are newly opened or existing ones are closed out.

If a trader buys 10 contracts to open a new position, open interest rises by 10. If a trader who already holds 10 contracts sells them to close, open interest falls by 10. If a buyer sells to a different trader who is opening a new position, open interest stays flat, even though volume registers the trade.

Open Interest vs Volume

This distinction trips up a lot of new options traders, so it's worth stating plainly:

Metric	What It Measures	Resets Daily?
Volume	Number of contracts traded during the current session	Yes, resets to zero each day
Open Interest	Total number of contracts currently open (not yet closed)	No, it's a running, cumulative total

High volume with low open interest suggests a lot of short-term, in-and-out trading at that strike. High open interest with modest daily volume suggests a large base of existing positions that aren't actively turning over — often built up by longer-term holders or hedgers.

Why Open Interest Matters

1. It's a Liquidity Signal

Strikes and expirations with high open interest generally have tighter bid-ask spreads and more reliable fills, because there are more existing counterparties. Strikes with little to no open interest can have wide spreads and poor execution even if the underlying stock itself is liquid — see our broader guide on liquidity in trading for why this matters before entering any position.

2. It Confirms (or Contradicts) Price Moves

Rising open interest alongside a rising price suggests new money is entering on the long side, reinforcing the move. Rising open interest alongside a falling price suggests new short or put positions are building, reinforcing the bearish case. Falling open interest during a price move — regardless of direction — often signals the move is being driven by existing positions closing out, rather than fresh conviction entering.

3. It Reveals Where the Market Is Positioned

Large concentrations of open interest at specific strikes (visible in an "open interest by strike" chart) can act as informal magnets or barriers around expiration, since market makers hedging large options positions sometimes need to buy or sell the underlying as price approaches those strikes — a dynamic often discussed as "max pain" or gamma exposure near monthly and weekly expirations.

How to Read Open Interest in Practice

Price Action	Open Interest	Interpretation
Price rising	Open interest rising	New long positions building — bullish confirmation
Price rising	Open interest falling	Short sellers/put holders closing out — a "short squeeze" style move, less durable
Price falling	Open interest rising	New short positions building — bearish confirmation
Price falling	Open interest falling	Long positions closing out (long liquidation), not necessarily fresh bearish conviction

Using Open Interest in Common Strategies

• Selecting strikes for cash-secured puts or covered calls: prefer strikes with meaningful open interest to ensure you can exit or roll the position without excessive slippage.
• Reading market sentiment around a specific level: unusually large open interest at a round-number strike close to expiration often flags a level where price action may compress or pin, particularly in heavily traded names.
• Avoiding illiquid contracts entirely: an option with near-zero open interest and volume, even on a liquid underlying stock, should generally be avoided regardless of how attractive the theoretical payoff looks, since entering and exiting it can be difficult and expensive.

Where to Find Open Interest Data

Open interest is published with a one-day lag on most options chains (it reflects the prior session's closing positions) and is available directly on the options chain of virtually every broker platform, typically alongside volume, bid, ask, and implied volatility for each strike.

Summary

Open interest is the running count of options contracts still open at a given strike and expiration, distinct from volume, which resets daily and only measures that session's activity. Rising open interest alongside a price move suggests new conviction entering the market, while falling open interest suggests existing positions unwinding — and checking open interest before entering any options trade is a simple, effective way to avoid strikes too illiquid to trade efficiently.

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Related reading:

• Options Trading for Beginners: Calls and Puts Explained — the foundational concepts open interest builds on
• Covered Calls Explained — a strategy where strike liquidity and open interest directly affect execution
• What Is Liquidity in Trading? — the broader concept open interest helps measure for options
• What Is Implied Volatility? — another key options metric to read alongside open interest