Thursday September 25, 2025 Open Interest Conditions Which Suggest Short Term Undervaluation Today

What Is Open Interest?

Open Interest is the total number of outstanding derivative contracts - typically futures or options - that have been opened but not yet settled, expired, or closed out. It represents the number of active positions traders hold at the end of each trading day. Every contract has two sides - a buyer and a seller. Open Interest increases when both participants initiate new positions (one new long and one new short), and decreases when positions are closed by offsetting trades. If an existing position is passed from one trader to another without marking to close, Open Interest remains unchanged. Open Interest differs from trading volume, which counts every trade executed during a session. Volume reflects how often contracts change hands; Open Interest reflects how many remain open. Rising Open Interest typically indicates fresh capital entering the market and can confirm price trends, while declining levels may signal traders exiting and weakening momentum. Traders and analysts monitor Open Interest to assess liquidity, market sentiment, and trend strength. Large Open Interest in a contract suggests high participation and tighter bid‑ask spreads. When combined with price movement - such as price advancing alongside rising Open Interest - it can support confidence in the persistence of a trend. However, Open Interest should be used alongside other indicators and broader market context.