open interest refers to the total number of options and futures contracts that are not closed or delivered on a given day. open interest is valuable, because computing the total number of opening transactions provides important clues about the liquidity of options and future price movements. for example, in the case of smarmy consulting, the company has 1,000 open contracts. a trader might interpret this as a lot of secondary market activity for a mid sized firm, which usually means a better chance of getting option orders filled at an attractive price. this can encourage more derivative trading. active investors also use changes in the open interest to predict where the underlying securities will go. an increase in smarmy consulting's open interest that coincides with an uptick in it's stock price will usually be interpreted as an upward trend. on the other hand, if open interest rises when the price drops, it typically confirms a downward trajectory. in fact, traders who track open interest may look for a number of pricing signals. for example, high open interest during a market peek is considered a downward ?, when the price drop is sudden, since many investors with a long position will have to liquidate. while a lot of derivative traders focus on factors such as volume and price, knowing how to interpret open interest can bring a new dimension to their analyses and provide a deep understanding of underlying trends and conditions.
- open interest・・・未決済の建玉
- secondary market・・・既発証券市場