What is open interest? Outstanding contracts versus volume

Open interest (OI) measures derivatives contracts that remain outstanding. Volume counts trades during a period; OI measures the stock of open contracts at a point in time. Each contract has a long and a short side, so adding both sides as separate contracts would double-count the total.

Example

Start with 100 outstanding contracts. A trade matching new long and new short positions for 10 contracts raises OI to 110. When both existing sides close 4 contracts, OI falls to 106. Next, a closing seller transfers 6 contracts to a new buyer while the opposite side remains open. That transfer adds 6 to trading volume but leaves OI at 106.

Providers may express OI in contracts, coin units or dollar value. A rise in Bitcoin’s price can increase dollar-denominated OI even when the coin quantity stays unchanged. Rising OI does not establish that there are more longs than shorts, and falling OI does not prove every closure was forced. An ordinary exit and liquidation are different events.