Core concepts · · 6 min read
What is open interest and how is it calculated?
Open interest (OI) is the total amount of futures or options contracts that are still open, meaning not yet closed, at a given moment. Because every contract has a buyer (long) and a seller (short), open interest does not show the market's direction; it shows how much positioning and leverage is tied up in the market.
In futures trading you do not buy or sell the asset itself but a contract linked to its price. Those contracts stay "open" until they are closed, and open interest counts exactly those open contracts.
Why each contract is counted once
Whenever there is a long position, there is a short position on the other side. A 1 BTC long and the 1 BTC short opposite it may look like two separate positions, but they are two sides of the same contract. So open interest counts only one side: 1 BTC long plus 1 BTC short equals 1 BTC of open interest.
That simple fact has an important consequence: across the whole market, the total size of longs always equals the total size of shorts. The sentence "there are more longs than shorts" cannot be true in terms of size. What can differ is how many people sit on each side and which side is acting more eagerly.
How open interest rises and falls
The change in open interest depends on whether each side of a trade is opening or closing a position:
| Buyer | Seller | Effect on open interest |
|---|---|---|
| Opens a new long | Opens a new short | Rises |
| Opens a new long | Closes an existing long | Unchanged, the position changes hands |
| Closes an existing short | Opens a new short | Unchanged, the position changes hands |
| Closes an existing short | Closes an existing long | Falls |
Let's walk through a hypothetical market step by step:
- Alice opens a 1 BTC long, Bob opens a 1 BTC short. Open interest is 1 BTC.
- Carol opens a 2 BTC long, Dave opens a 2 BTC short. Open interest rises to 3 BTC.
- Alice sells 1 BTC to close her long; the buyer, Erin, opens a new long. The position changes hands and open interest stays at 3 BTC.
- Carol sells 2 BTC to close her long, and Dave buys 2 BTC to close his short. Open interest drops to 1 BTC.
These four steps produced 6 BTC of trading volume, yet only 1 BTC of open interest remains at the end: Erin's long and Bob's short. Liquidations reduce open interest too. A liquidation is when the exchange force-closes a position whose collateral is no longer sufficient, and every forced closure removes one of the open contracts.
Open interest versus trading volume
The two are often confused:
- Trading volume is a flow: it measures how many contracts changed hands over a period. It rises with every trade and starts again from zero in each new period.
- Open interest is a stock: it measures how much open risk is sitting in the market at a given moment. As long as positions are not closed, it can build up over days or weeks.
Think of a parking garage. Volume is the number of cars passing through the entrance and exit; open interest is the number of cars parked inside at that moment. Lots of cars can come and go while the garage stays half empty. Conversely, the garage can slowly fill up even when traffic at the gate is light.
High volume with flat open interest suggests the same positions are changing hands quickly. Low volume with steadily rising open interest can point to leveraged risk quietly building up.
Watch the unit: coins or dollars?
Open interest is shown in two ways: as a number of contracts or coins, or as a dollar value. The dollar value changes whenever price moves, even if no new positions are opened.
A hypothetical example: an exchange has 10,000 BTC of open interest and the price is $50,000. The dollar value is $500 million. If the price climbs to $55,000 and not a single new position is opened, open interest in dollar terms rises to $550 million. A headline saying "open interest up 10%" may really just be telling you that price rose 10%. To see the real change in positioning, look at the coin-denominated figure.
Open interest is also often shown for a single exchange or a single contract type. Contracts margined in USDT (USDT-M) and contracts margined in the coin itself (COIN-M) can be tracked separately. One exchange's data may not represent the whole market, and open interest in the options market is a separate dataset as well.
What open interest tells you, and what it doesn't
Open interest sheds light on questions such as:
- How much leveraged positioning is tied up in the market?
- Are new participants coming in, or are existing positions being closed?
- How many positions have built up that could be forcibly closed in a sharp move?
On its own, though, open interest does not reveal direction. Rising open interest is made of new longs and new shorts at the same time, because they are always opened together. To judge which side is more eager, you need to read it alongside price action, the funding rate (the periodic payment between longs and shorts on perpetual contracts) and liquidations. The scenarios that come from reading open interest and price together are a separate topic in their own right.
In the Sezga terminal, open interest can be tracked together with the funding rate, mark price, the long/short ratio and the Binance futures liquidation feed. Seeing these side by side makes it easier to tell whether a drop in open interest came from voluntary closing or from forced liquidations.
Key takeaways
- Open interest is the total amount of futures or options contracts that are still open at a given moment, with each contract counted once.
- It rises when both sides open new positions, falls when both sides close, and stays unchanged when a position changes hands.
- Trading volume measures a flow; open interest measures an accumulated stock.
- Dollar-denominated open interest moves with price; check the coin-denominated figure to see the real change.
- Open interest does not show direction; read it together with price, the funding rate and liquidations.