Open Interest Additions and Unwinding

What this unit covers

Learn the difference between open interest rising, new contracts being created, and falling, existing contracts being closed, and why the change is itself informative.

By the end you will be able to

• Explain why rising open interest means new contracts are being created.
• Explain why falling open interest means existing contracts are being unwound.
• Recognise that every open interest change needs two willing counterparties, never one side alone.

How it starts: Same Number, Two Fridays

1. You check the open interest on a stock future two Fridays in a row.
2. Both Fridays show exactly 10,000 contracts outstanding, no difference at all.
3. The mood in the market feels completely different on each day, so what changed?

Words you will meet

Open interest

The total number of contracts in a derivative that are still open and not yet closed.

Unwinding

Closing an existing position by an existing buyer and seller both exiting together.

In this module: Open Interest Analysis

1. Open Interest Additions and Unwinding (this unit)
2. Price-OI Combinations
3. Call and Put Positioning
4. OI Walls, Shifts, and Event-Risk Limits