Open Interest

[kagi]

I am struggling to understand open interest.

Looking at the COT report for sugar no 11 they have
The open interest is 532712

Commercials long 280157 short 414231
Non commercials Long 125167 short 36033
Non reportable long 79408 short 34468

The total of all the long positions is 484732
And the total of all the short positions is also 484732
I assume that these are the same as every contract must have a buyer and a seller
But what is Open Interest?

 

[rog1111]

the number of contracts still open at that time ie 484732, should also be on the report

I am struggling to understand open interest.

Looking at the COT report for sugar no 11 they have
The open interest is 532712

Commercials long 280157 short 414231
Non commercials Long 125167 short 36033
Non reportable long 79408 short 34468

The total of all the long positions is 484732
And the total of all the short positions is also 484732
I assume that these are the same as every contract must have a buyer and a seller
But what is Open Interest?

 

[anley]

Think of a new futures contract, say on Car Tyres that opens tomorrow. Because it has not traded yet the OI will be zero.

But on the open tomorrow you and I meet, you're bullish and I'm bearish so we trade, I sell 10 lots to you so although only 10 lots have traded the OI is actually 20 lots (you long 10, me 10 short). That's pretty much what it is. Then they spit it up into a few sections so you have the commercials (Goodyear Tyre) and the large specs (Wall St firms) and the small specs, ie you and me.

It's important to split the OI up because then you get a better feel for who is in the market, ie are small specs the main players whereas 6 months ago they only had a tiny interest in the market, that is very relevant information to some people.

If you're planning to use OI in your trading then think of it as just another indicator which sometimes will help you a lot but other times lose you money.

Sort of like buying when the MACD turns bullish, it only works some of the time.

The best OI trades are when things get really skewed one way or the other with the small spec, but you might only get one of these trades every few years per commodity.

OI for financial products is virtually useless in my opinion because so many of the trades are done against other financial products and also financial futures are cash delivered, sugar, gold and most commods etc are not.

 

[kagi]

thanks for the replies.
I have just realised if you add the spreads to either the total amount of longs or shorts
48078 + 484732 you get 532810 virtually the OI amount.

 

[Mornington Crescent]

you should also know why it changes.

Buyer-------------------------------------Seller--------------------------Open Interest
New buyer ----------------------------- New seller -------------------Increases
New buyer-------------------------------Former buyer sells -------Unchanged
Former seller buys to cover-------- New seller-------------------Unchanged
Former seller buys to cover --------Former buyer sells -------Decreases

and its always released after the event, usually the next day.

 

[josbarr]

Price Volume Open Interest Interpretation

Rising Rising Rising Market is Strong
Rising Falling Falling Market is Weakening
Falling Rising Rising Market is Weak
Falling Falling Falling Market is Strengthening

 

[Sledgehead]

Think of a new futures contract, say on Car Tyres that opens tomorrow. Because it has not traded yet the OI will be zero.

But on the open tomorrow you and I meet, you're bullish and I'm bearish so we trade, I sell 10 lots to you so although only 10 lots have traded the OI is actually 20 lots (you long 10, me 10 short). That's pretty much what it is.

Errr, no, that's prety much TWICE what it is (your own logic should inform you as much - think about it, how many futures contracts have been entered into? If I take on a building contract, does that mean the client and I have atotal of 2 contracts? 'Course not! It's the same contract!)

Look @ USD/CHF (issue date 19/08/2005)

Open_Interest_All 66890
NonComm_Positions_Long_All 6485
NonComm_Positions_Short_All 34107
NonComm_Postions_Spread_All 407
Comm_Positions_Long_All 48828
Comm_Positions_Short_All 15343
Tot_Rept_Positions_Long_All 55720
Tot_Rept_Positions_Short_All 49857
NonRept_Positions_Long_All 11170
NonRept_Positions_Short_All 17033

Shorts+spreads = Longs+spreads = Open Interest = 66890

All figures should balance EXACTLY (no "near enuff" stuff)