Open Interest Explained
What open interest means in futures and options markets, how it differs from trading volume, and what its changes can and cannot tell you.
Open interest (OI) is the total number of futures or options contracts that are currently open and have not yet been closed or settled. Put simply, it measures the size of all "live" positions in a derivatives market at a given moment. Traditional exchanges have tracked it for decades, and in crypto it gets a lot of attention because perpetual futures trade in very large volumes.
How open interest is created
Every futures contract has two sides: a buyer who is long and a seller who is short. When one trader opens a new long and another trader opens a new short at the same time, a new contract comes into existence and open interest goes up by one.
There are three possible cases:
- Both traders open new positions. Open interest increases.
- Both traders close existing positions. The contract disappears and open interest decreases.
- One trader opens while the other closes. The contract simply changes hands, and open interest stays the same.
A key point: for every long there is always exactly one short. That means open interest on its own does not tell you whether bulls or bears dominate. It only shows how many contracts, and how much money, are currently committed.
How it is measured
Open interest is usually shown in two ways:
- In contracts or coins — for example, the total amount of BTC represented by all open positions.
- In dollars — the same figure multiplied by the current price.
The dollar figure is convenient for comparisons, but it has a catch. If the price of the asset rises, dollar open interest rises too, even if no new positions were opened. For that reason analysts often look at both numbers side by side.
Open interest vs. trading volume
Volume counts how many contracts changed hands during a period, such as one day. The same contract can be traded many times in a day, and each trade adds to volume. Open interest is a snapshot: how many positions remain open right now.
High volume with flat open interest means traders are mostly passing existing positions back and forth. Rising open interest means new positions, and usually new capital, are entering the market.
How traders read the changes
Open interest is typically viewed together with price. Common interpretations include:
- Price up, open interest up — the move is accompanied by new positions being opened.
- Price up, open interest down — part of the move may come from shorts being closed.
- Price down, open interest up — new positions are being opened while the price falls.
- Price down, open interest down — positions are being closed, sometimes by force.
These are descriptions, not rules or trading signals. The same picture can have different causes, so the metric always needs context.
Open interest and liquidations
Leverage is common in crypto derivatives. When open interest climbs quickly, a large number of positions has built up, and many of them may be leveraged. A sharp price move can then force some of those positions to close automatically. These forced closures are called liquidations.
A wave of liquidations usually shows up as a fast drop in open interest. Positions vanish not because traders chose to exit, but because the exchange closed them. The liquidations article covers this mechanism in more detail.
Open interest and funding
In perpetual futures, open interest is often read alongside the funding rate. Funding shows which side is paying the other to keep positions open, which hints at where the market is leaning. Open interest adds the scale: how large the pool of positions actually is.
Limitations
- Exchanges report separately. Each venue has its own open interest, and data aggregators combine them using their own methods.
- Not everything is visible. Over-the-counter deals and some decentralized venues may be missing from the totals.
- No direction. The number does not say who is right, buyers or sellers.
- Price effect. Dollar open interest moves with the asset price.
Where to find it
On Satoshi Daily, open interest for major assets appears in the derivatives section, next to funding rates and liquidation data, so you can see the overall state of the futures market on one screen.
Summary
Open interest is the number of contracts that are open and not yet closed. It rises when new positions appear and falls when they are closed. It helps gauge how much activity and leverage sits in the derivatives market, but it does not reveal which way the price will move.