OPEN INTEREST:

Open interest is the number of contracts held by buyers or owed by short sellers in a given
market on a given day. It shows the number of existing contracts. Open interest equals either
a total long or a total short position.

Open interest reflects the intensity of conflict between bulls and bears. It reflects the
willingness of longs to maintain long positions and the willingness of shorts to maintain short
positions. When bulls and bears do not expect the market to move in their favor, they close
out their positions and open interest shrinks.

Trading Rules
A 10 percent change in open interest deserves serious attention, while a 25 percent change
often gives major trading messages. The meaning of rising, falling, or flat open interest
depends on whether prices are rallying, falling, or flat at the time of change in open interest.

1. When open interest rises during a rally, it confirms the uptrend and gives a signal that
it is safe to add to long positions. It shows that more short sellers are coming into the
market. When they bail out, their short covering is likely to push the rally higher.
2. When open interest rises while prices fall, it shows that bottom-pickers are active in
the market. It is safe to sell short because these bargain hunters are likely to push
prices lower when they throw in the towel.
3. When open interest rises while prices are in a trading range, it is a bearish sign.
Commercial hedgers are more likely to sell short than speculators. A sharp increase in
open interest while prices are flat shows that savvy hedgers are probably shorting the
market.
 4. When open interest falls sharply while prices are in a trading range, it identifies short
covering by major commercial interests and gives a buy signal. When commercials
start covering shorts, they show that they expect the market to rise.
5. When open interest falls during a rally, it shows that both winners and losers are
getting "cold feet." Longs are taking their profits, and shorts are covering. Markets
discount the future, and a trend that is accepted by the majority is ready to reverse. If
open interest falls during a rally, sell and get ready to sell short.
6. When open interest falls during a decline, it shows that shorts are covering and buyers
are taking their losses and bailing out. If open interest falls during a slide, cover shorts
and get ready to buy.
7. When open interest goes flat during a rally, it warns that the uptrend is getting old and
the best gains have already been made. This gives you a signal to tighten stops on long
positions and avoid new buying. When open interest goes flat during a decline, it warns
you that the downtrend is mature and it is best to tighten stops on short positions. Flat
open interest in a trading range does not contribute any new information.

SL OPEN
PRICE IMPRESSION
NO. INTEREST
1 RISE RISE BULLISH
2 RISE FALL BEARISH
IN A TRADING
3 RISE BEARSH
RANGE
IN A TRADING
4 SHARP RISE COMMERCIALS ARE BEARISH
RANGE
IN A TRADING
5 FALL BULLISH
RANGE
IN A TRADING
6 SHARP FALL SHORT COVERED BY COMMERCIALS
RANGE
BOOK PROFIT FROM LONGS & READY TO SELL
7 FALL RALLY
SHORT
8 FALL DECLINE BOOK PROFIT FROM SHORTS & READY TO BUY
9 FLAT RALLY BEST GAIN HAVE ALREADY BEEN MADE
1O FLAT DECLINE DOWN TREND IS MATURED
11 FLAT FLAT WAIT AND WATCH
 OPTION SHEET ANALYSIS BY OPEN INTEREST

SL NET NET
MARKET CE OI PE OI IMPRESSION
NO CHANGE CHANGE
CALL BUYER HOLD
1 RISE RISE RISE FLAT FALL BULLISH
POSITION
PUT BUYER HOLD
2 FALL FLAT FALL RISE RISE BEARISH
POSITION
LITTLE LITTLE LITTLE LITTLE LITTLE
3 NUTRAL WAIT AND WATCH
FALL RISE CHANGE RISE CHANGE
LITTLE LITTLE LITTLE LITTLE LITTLE
4 NUTRAL WAIT AND WATCH
RISE RISE CHANGE RISE CHANGE
CALL BUYERS BOOK
5 RISE FALL RISE BEARISH
PROFIT
PUT BUYERS BOOK
6 FALL FALL RISE BULLISH
PROFIT
HUGE CALL SELL & PUT SELL
7 FALL FALL FALL RISE BEARISH
RISE COVER
HUGE PUT SELL & CALL SELL
8 RISE FALL RISE FALL BULLISH
RISE COVER
CALL BUY & PUT
9 RISE RISE RISE FALL FALL BULLISH
BUYER COVER
PUT BUY & CALL
10 FALL FALL FALL RISE RISE BEARISH
BUYER COVER
LITTLE LITTLE CALLS SELLERS ARE
11 RISE BEARISH
RISE FALL ACTIVE
LITTLE LITTLE PUTS SELLERS ARE
12 FALL BULLISH
RISE FALL ACTIVE
13 RISE RISE FALL RISE FALL BEARISH CALL WRITING / SELL
14 FALL RISE FALL RISE FALL BULLISH PUT WRITING / SELL