Open Interest (OI)
Open Interest (OI) is the total number of active (unsettled) derivative contracts, such as futures or options, in the market.
✦ Key Insight
OI helps traders understand market participation and strength behind a trend. Rising OI confirms trend strength, while falling OI may signal weakening momentum.
✕ Common Misconceptions
Common Mistakes
Looking at OI without price context
Assuming OI alone predicts direction
Ignoring sudden OI spikes (possible liquidations)
Detailed Explanation
How It Works
New positions → OI increases
Positions closed → OI decreases
Combined with price to interpret sentiment
FAQs
Q: Is high OI bullish?
Not necessarily—it depends on whether longs or shorts dominate.
In Practice
Dig Deeper
Funding Rate
The funding rate is a periodic payment exchanged between long and short positions in perpetual futures markets, designed to keep the perpetual's price tethered to the underlying spot price. When longs pay shorts the rate is positive; when shorts pay longs it is negative.
Volume
Volume measures the total amount of an asset traded within a specific time period.
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