Open Interest – total number of outstanding options for a specific strike price
ACL_Tearer on
Can’t use it for anything definitively. As it’s just contracts that are open, you can’t tell if it’s the MMs that have the open, if it’s retail or an institution or if it’s a hedge. That’s not to say that you won’t see OI spike due to some insider knowledge along the lines, but it’s all guess work.
alexstonks34 on
It can be subjective (as a lot of things are in trading).
I personally sometimes use OI as an indicator of possible significant levels which could be a support or resistance later on. The higher the OI on a strike the stronger the level for the underlying.
I also use it as an indicator of liquidity (in addition to volume) to tell me how likely could I get a fill on those contracts with minimal slippage. The higher the OI the higher the liquidity.
There are many caveats here, I know, and it can be circumstantial as an indicator. Just sharing how I apply it.
Astronaut-Proof on
I usually got for options with high OI because it means the liquidity is good and the general direction of the option may mean someone else knows something or lots of people are betting it could hit. Could also just be a hedge from big money so trade as you will
gangang619 on
Usually just means tighter spreads
BinBender on
It is a useful indicator for which options are most liquid. Options with low OI often have a large bid/ask spread, and it may be difficult to buy or sell at a reasonable price close to the midpoint, so you often have to accept poor fills, which may negatively impact your returns greatly.
Be-ur-best-self on
OI tells you how liquid an option is.?look for positions with at least 500 contracts
d4ng3rz0n3 on
It could be a sign, it could be a confluence, it could be a coincidence, it could be nothing.
8 Comments
Open Interest – total number of outstanding options for a specific strike price
Can’t use it for anything definitively. As it’s just contracts that are open, you can’t tell if it’s the MMs that have the open, if it’s retail or an institution or if it’s a hedge. That’s not to say that you won’t see OI spike due to some insider knowledge along the lines, but it’s all guess work.
It can be subjective (as a lot of things are in trading).
I personally sometimes use OI as an indicator of possible significant levels which could be a support or resistance later on. The higher the OI on a strike the stronger the level for the underlying.
I also use it as an indicator of liquidity (in addition to volume) to tell me how likely could I get a fill on those contracts with minimal slippage. The higher the OI the higher the liquidity.
There are many caveats here, I know, and it can be circumstantial as an indicator. Just sharing how I apply it.
I usually got for options with high OI because it means the liquidity is good and the general direction of the option may mean someone else knows something or lots of people are betting it could hit. Could also just be a hedge from big money so trade as you will
Usually just means tighter spreads
It is a useful indicator for which options are most liquid. Options with low OI often have a large bid/ask spread, and it may be difficult to buy or sell at a reasonable price close to the midpoint, so you often have to accept poor fills, which may negatively impact your returns greatly.
OI tells you how liquid an option is.?look for positions with at least 500 contracts
It could be a sign, it could be a confluence, it could be a coincidence, it could be nothing.