Definition
Open Interest Analysis
Open interest analysis studies changes in outstanding F&O contracts to gauge where support, resistance, and positioning lie.
Open interest is the total number of outstanding contracts; changes in it, read alongside price, reveal whether fresh positions are being built or unwound. On the option chain, strikes with the highest call OI often act as resistance and those with the highest put OI as support.
Indian F&O traders combine OI data with price to classify moves as long build-up, short build-up, short covering, or long unwinding, and to spot the key strikes on Nifty and Bank Nifty. OI shifts during the day, especially near weekly expiry, are watched closely for clues on where big players are positioned.
Related terms
- Open InterestOpen interest is the total number of outstanding futures or options contracts that have not yet been closed.
- Max PainMax pain is the strike price at which the largest number of option buyers would lose money on expiry.
- Long Build-upA long build-up is when both price and open interest rise together, signalling fresh buying and bullish positioning.
- Short Build-upA short build-up is when price falls while open interest rises, signalling fresh selling and bearish positioning.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.