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YouTube T3-04: What is the Open Interest?

Nicole Seaman

Director of FRM Operations
Staff member
Along with volume, "open interest" is considered a key measure of liquidity. Open interest is the number of open long positions; or, equivalently, the number of open short positions. But it is NOT the sum of long + short. Each open long must have a matching open short. This video illustrates the four scenarios: (1) both buyer/seller enter new contracts; this INCREASES the open interest; (2) One buyer/seller enters a new contract but the other is offsetting (aka, closing out) an existing contract; this is NO CHANGE to the open interest; (3) both buyer and seller are offsetting; this REDUCES the open interest; and (4) the commodity is DELIVERED which REDUCES the open interest, as delivery extinguishes the contract.

David's XLS is here: http://trtl.bz/011018-open-interest-xls