Glossary · Options
Open Interest
Last updated:
Open interest (OI) is the total number of derivative contracts that are currently outstanding — opened by a buyer and a seller and not yet closed, exercised or settled. It measures how many positions exist, not how many trades happened: that second thing is volume. A single contract passed between ten traders in a day generates volume of ten but leaves OI unchanged; OI rises only when a new buyer and a new seller create a fresh contract, and falls when both sides close.
In the NSE option chain, OI is displayed per strike, and its distribution is widely read as a positioning map: strikes with heavy call OI are often treated as areas of resistance and heavy put OI as support, on the logic that large option sellers defend those levels. This is an interpretive convention, not a law.
Example
Suppose the NIFTY 25,000 put shows OI of 68 lakh contracts while surrounding strikes show 20–30 lakh. Combined with rising OI and falling premium — a pattern read as fresh put writing — many traders would treat 25,000 as a support zone for the week. If NIFTY then breaks below it, the unwinding of those positions can accelerate the move. Illustrative numbers, not a prediction.
Why it matters
For systematic traders, OI is a usable data input: changes in OI alongside price form classic interpretations (long build-up, short covering, and so on) that can be encoded as filters, and OI concentration helps select liquid strikes where slippage stays manageable. As with any crowd-positioning signal, its predictive value should be backtested, not assumed.
In INDfolio AI, options strategies are tested on NSE options data where strike liquidity matters — see Options backtesting.