What is open interest? Learn

What open interest is

Open interest (OI) is the total number of futures contracts that are open right now, usually shown in dollars. Every contract has two sides — someone long and someone short — and counts once. If a new buyer and a new seller open a position together, open interest grows. If a long closes by selling to a short who is also closing, it shrinks.

Open interest is not volume. Volume counts every trade, including positions that open and close within minutes. Open interest shows how much money stays in the market — how much is positioned and exposed to the next move.

Reading open interest with price

Open interest itself has no direction, so it is read together with the price. The usual rule of thumb:

A move backed by rising open interest has new money behind it. A move with falling open interest is driven by positions being closed and often runs out of fuel once they are gone.

What sharp changes tell you

• A fast jump in open interest means leverage is piling into the coin. The more one-sided it is, the bigger the risk of a squeeze in the other direction.
• A sudden drop usually comes from liquidations or a rush to close. After a large drop the market has less leverage and often calms down.
• Open interest with funding. Rising open interest with strongly positive funding points to crowded longs; with strongly negative funding — crowded shorts.

Limits to keep in mind

The table above is a rule of thumb, not a fact about who traded: open interest does not tell which side opened or closed, only that positions were added or removed. Open interest also differs between exchanges, and a change on one venue is only part of the market. Use it as context for price, not as a signal on its own.