GLOSSARY // Options
Open Interest
Open interest counts the option contracts that currently exist and remain open at a given strike and expiration — positions created but not yet closed, exercised, or expired. It is not volume: volume counts today's trades, while open interest is the standing tally, updated overnight.
The distinction matters for reading flow. Heavy volume with rising open interest means new positions are being built; heavy volume with falling open interest means existing ones are unwinding. Open interest is also the practical liquidity gauge — strikes with thousands of open contracts trade with tight spreads, while a strike showing 12 contracts can cost half its value in slippage to exit.
The 100 call shows open interest of 40,000 and today's volume of 10,000; the 97.50 call shows open interest of 300. The first strike quotes $2.00 x $2.05 — a nickel wide. The second quotes $2.90 x $3.35, and crossing that 45-cent spread twice costs more than many trades ever earn.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.