Positioning
Open Interest
Outstanding futures contracts that have not been settled — a gauge of participation and liquidity.
What it is
Open Interest is the total number of outstanding futures contracts that have not been settled. Each contract represents a long and a short position, so open interest shows the total number of contracts, not the number of traders. It increases when new positions are opened and decreases when positions are closed.
Why it matters
Open Interest provides insight into market participation and liquidity. Rising open interest during a price trend suggests new money is entering, which can strengthen the trend. Declining open interest during a trend might signal the trend is losing steam. High open interest also indicates good liquidity.
How traders use it
Watch open interest alongside price action. Rising prices with rising open interest suggests strong participation and a healthy trend. Rising prices with falling open interest might indicate short covering rather than new buying interest. Use it to gauge market strength and liquidity.
Example
If gold prices are rising and open interest is also rising, this suggests new buyers are entering the market, strengthening the uptrend. If prices rise but open interest falls, it might indicate short covering rather than new buying interest.
Deeper context
COT categories partition the same open-interest pie. When OI expands, someone is initiating risk; when it contracts, risk is leaving. Combine OI trend with which category is driving the change — commercial hedging versus speculative initiation tell different stories.
Related terms
COT, Volume, Liquidity