Change in open interest = contracts created (both sides opening) − contracts retired (both sides closing, plus exercises and expirations)
What it is
Open interest counts the option contracts currently alive for one specific series: one underlying, one expiry, one strike, and one type (call or put). Every option is a two-sided agreement — it comes into existence when a buyer and a writer (seller) each open a new position, and it stops existing when both sides close out, when the contract is exercised, or when it expires. Open interest is that running tally of live contracts. It is reported per series, not per stock, so a single underlying has a separate open-interest figure for every strike and expiry on its chain.
Why it matters
Open interest and volume are different things, and beginners often mix them up. Volume counts contracts traded during a session and resets to zero each morning; open interest counts contracts still outstanding and carries over day to day. A series can trade heavily and still end with unchanged open interest, if those trades merely passed existing contracts between participants. Because the figure is an end-of-day clearing tally rather than a live quote, it indicates roughly how heavily a series is used, not how easily it trades right now. It is purely descriptive: it says nothing about which way the underlying will move, and nothing about risk. The two sides behind every contract are not mirror images — a buyer can lose the entire premium paid if the option expires worthless, while the loss on an uncovered written call is theoretically unlimited.
How it's calculated
Open interest is not something a reader computes — it is tallied by the clearing house after the close and published the following morning, which is why quote screens show the prior session figure rather than a live one. In the US the Options Clearing Corporation (OCC) produces the official count; in Canada the Canadian Derivatives Clearing Corporation (CDCC) does the same for listed options. The tally rises when both sides of a trade open new positions, falls when both close, and is unchanged when one side opens while the other closes. Exercise and assignment retire contracts, and anything still outstanding at expiry drops out of the count.
Cross-border note. Open interest is tallied per clearing house, not globally. Options on US-listed shares clear through the Options Clearing Corporation; Canadian-listed equity options trade on the Bourse de Montréal and clear through the Canadian Derivatives Clearing Corporation. A company interlisted in both countries can carry two chains with separate open-interest figures, tallied independently rather than added together.
FAQ
What is the difference between open interest and volume?
Volume is a rate of activity: how many contracts changed hands during a trading session. It starts at zero each morning. Open interest is a level: how many contracts are still outstanding, carried forward day to day. High volume with flat open interest means contracts mostly moved between participants rather than being newly created or retired.
Does high open interest mean an option is a good trade?
No. Open interest describes how many contracts exist in a series; it carries no information about whether the option is fairly priced or which way the underlying will move. Every outstanding contract has a buyer and a writer whose risks are not comparable — the buyer can lose the whole premium paid, while an uncovered call writer faces a theoretically unlimited loss. The figure cannot be read as bullish or bearish on its own.
Why does open interest on a quote screen not update during the day?
Because it is calculated by the clearing house after the session ends, not trade by trade. The figure displayed during trading hours is normally the previous session official count. Volume, by contrast, updates in real time. The lag comes from how the number is produced rather than from any one data feed.