Open Interest
What is open interest? The total number of outstanding futures contracts in a market, used to judge whether money is entering or leaving a trend.
Open interest is the number of futures contracts that exist right now: opened, and not yet closed or settled. Every contract has one long and one short behind it, so open interest measures how much total commitment is standing in the market. Where net positioning tells you which way a group leans, open interest tells you how much conviction the whole market is carrying.
How it works
Open interest only changes when positions are created or destroyed. If a new buyer trades with a new seller, a contract is born and open interest rises by one. If an existing long sells to an existing short who is covering, a contract dies and open interest falls by one. If a new buyer takes over an existing long's position, the contract just changes hands: volume, but no change in open interest.
That accounting makes open interest a clean read on flows. Price can rise for two very different reasons: new money buying into the market, or old shorts giving up and buying back. The chart looks identical; open interest tells them apart.
A worked example
Suppose euro futures rally 3% over a month. In scenario one, open interest climbs from 600,000 to 700,000 contracts while speculator net length grows: new capital is committing to the move, the classic signature of a trend with fuel left. In scenario two, the same rally comes with open interest falling from 600,000 to 520,000: the move is mostly shorts covering, positions being destroyed rather than created. Short-covering rallies can be sharp, but they end when the covering ends, because nobody new actually bought the story. Same price action, opposite prognosis, and only open interest showed the difference.
Common mistakes
The most common error is reading open interest changes without price context: rising open interest is not bullish or bearish by itself, since every new contract adds a long and a short. It only gains meaning next to the direction of price and the positioning of each group. The second error is confusing it with volume; a heavy-volume day that leaves open interest flat was repositioning, not new commitment.
See it in the data
Read open interest next to the speculator net positions on the COT positioning pages; the combination shows whether the crowd's lean is growing, holding, or quietly being dismantled.