Open interest (OI)

Open interest is the count of options contracts at a specific strike and expiry that are still open: bought or sold and not yet closed, exercised, or expired. It's a running total, updated once per day after each session, and it's distinct from volume, which resets to zero every morning and simply counts how many contracts changed hands that day. A contract can trade heavily on a given day without changing open interest at all, if buyers are simply trading with sellers who are closing out existing positions.

The relationship between volume and open interest is the useful read. When a day's volume at a strike runs well above the existing open interest, that tells you new positions are being opened faster than old ones are closing, a sign of fresh interest rather than existing holders trading among themselves. When volume stays below open interest, activity that day is more likely churn among existing positions. Open interest levels themselves also mark out where the crowd is already positioned, which feeds into calculations like max pain.

Open interest doesn't tell you who holds the position or which direction they're betting. A large open interest at a call strike could be long calls, short calls, or some mix of both sides, and the daily figure doesn't separate them. It also updates with a lag. The number you see reflects the prior session's close, not trades happening right now, so a very active morning won't show up in open interest until the next day's figure prints. And high open interest at a strike says nothing on its own about whether that position is a directional bet or one leg of a hedge.

Say a ticker shows 12,000 contracts of open interest at its 50-strike calls coming into the session, and by midday 45,000 contracts have traded at that same strike. Volume at nearly four times the existing open interest is a strong signal that new positions are being opened rather than existing holders simply trading with each other, the kind of reading that gets a print flagged as unusual activity in the first place. If instead only 3,000 contracts traded against that same 12,000 open interest, the day's activity would look more like routine turnover among people already holding the position.