Open Interest (OI) represents the total number of outstanding derivative contracts (futures or options) that have not been settled. Tracking changes in OI alongside price action reveals whether institutional participants are building long positions, shorting, or short-covering.
The 4 Quadrants of Price-OI Relationship
| Price Movement | Open Interest (OI) | Market Interpretation |
|---|---|---|
| Price Rising | OI Increasing | Long Buildup (Strongly Bullish) |
| Price Falling | OI Increasing | Short Buildup (Strongly Bearish) |
| Price Rising | OI Decreasing | Short Covering (Temporary Bullish Bounce) |
| Price Falling | OI Decreasing | Long Unwinding (Weakening Trend) |
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