Volume & Open Interest Explained | Options Trading Concepts
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- Опубликовано: 13 июл 2024
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7:46 **Sarah is already LONG 4 calls** is what I meant to say - sorry about this!
glad i only spent five minutes frustrated there before finally being like ok there's no fucking way that adds up, i'm checking the comments lol
It's okay Mike we all make mistakes! Glad you are correcting it.
Yes .. it crashed my mind for few moments .. turned subtitles on to recheck my hearing . Finally issue resolved in comments . But a great learning 👍
one of the better videos I've seen about open int. vs volume well done
Thanx for such a good representation of concepts. Cheers Mike cheers 🎉
finally someone on the interwebs that explains it correctly. well played. now good day sir... I said good day!! :)
cringe
Came across multiple videos but this one is a simple, well explained & presented...Very Nice!.
Seems like open interest is the most accurate indication of liquidity
Actually bid/ask size indicates more of how much liquidity is currently available
@@ChaceBonanno how so? Thanks
@@ChaceBonanno what is considered a liquid size?
Na open interest
Was looking at volume and open interest right at the market open, and volume was super low for SPY. I instantly knew that I was focusing on the wrong thing. Found this video, and instantly cleared up my confusion. Thanks
0:56 contracts i could be part of in some way
0:58 volume closed or traded
2:50 vol can only go up
Thank you so much for breaking options stats down. I've been searching and searching for this type of information. You don't how much your video has saved my butt. I really appreciate you. Also, how can I know the option volume and open interest before buying a contract?
Barchart from your computer, or the OptionStrat app on mobile. Cheers.
awesome bro.. appreciate it
GREAT VIDEO. I WILL AD THIS TO MY GROUP..
Thank you kindly!
I like your explanation Mike!
Thanks for great explanation totally get it now
Great video. Thank you!
very clear video. thank You!
Excellent explanation! I finally understand it :))))
Good one.!!!
Wonderful Explanation ! , you da man
GOOD, THANK YOU.
I'd love to see a vid on buy to open/buy to close/sell to open/sell to close and the mechanics of those transactions explained in a similar way. For some reason, those concepts just don't "stick" in my head.
This segment might help:
Long & Short - www.tastytrade.com/tt/shows/mike-and-his-whiteboard/episodes/options-bullish-bearish-11-12-2015
Great video. Thanks! I learned from the comments and replies too. Question: Your example is referring to one type of option - eg. an AAPL200911C110.? Also, do I understand correctly that Volume refers to just one day, but OI can be/ is carried over from the previous day? Thank you! Hopefultrader
Excelente vídeo 🍀
subbed 12 seconds in bc of the led zep intro
Is not call sale and put sale of same underlying is calculated separately and accounted for? Along with their respective volumes too? Since their calculation and difference between them will determine the trend direction of the stock. Pl clarify.
Thanks for the explanation. With regards to volume on a stock chart. The volume bars for a specific time period change from red to green.
Does the change in colour simply mean less or more volume than the previous bar? or is the change in colour refer to more buying than selling?
It depends on the broker's depiction of what's happening - most red/green bars are in reference to the stock price, where volume is typically a solid color that appears at the bottom of the chart.
Thank you
So if I understand correctly, open interest goes up when both parties are opening, goes down when both parties are closing but stays the same if one is opening and the other is closing. Hence, the name, open interest, because to create it you need two open sides.
So, kinda like a company issuing stocks, the float stays the same regardless of how much they are traded, unless the company buys them back.
Bring it on home is such an underrated song 🔥🔥
What would a take away be if say there was a huge volume of Calls several months out. i.e. on Friday for WFM 11/17/17 Expiration 42 Strike $1.20 Mark, the volume was 48,625 with only 181 Open Interest? Would you interpret that to mean a lot of smart money is betting the Stock Price will be over $43.20 come 11/17/17?
Craig,
If the volume was that high and the open interest was that low, that would mean whoever was trading that was closing out of contracts. If it were the other way around and open interest was that high, potentially yes it could mean there is a big trader out there betting on directional movement towards that strike.
At a particular strick highest open interest and highest volume that day, but change in oi is minimum then how to identify who is smart on that perticular strick call buyer or seller.
One more hint that stock is moving upward that day. And strick price is just above the close price
I have found lots of useful information in tastytrade, I've learnt a lot so far! Thank you for all of these resources ^^!
From all the videos I have watched until now, I get you choose the potential stocks from the S&P500 with Volume>1'000.000, Open Interest>1000 and Options Volume>1000 ( and Volatility criteria depending of the type spread). Is there any other criteria u consider to screen the stocks you may choose to trade? or do u always check a fixed number of stocks/ETFs to trade base on these criteria? is there any video about this topic(the picking list)? thank you :)
Good question!
We usually stick to the liquid underlyings, which tend to be some of the more popular household names. Outside of that, we may focus on sectors that we're familiar with. For example if someone is very interested & knowledgable about the car industry, they may focus on those types of stocks as long as they're liquid. Sticking with liquidity is key for us, regardless of what sector we're trading in.
Good to know it, Thank you! ^ ^
Question: every now and then I noticed the bid has a hard time rising despite the stock moving up (on a call for example). Is there a way to tell if an option strike price will have that problem before I get in a trade? Thx and your video is very informative.
This depends on a lot of things, but if you're trading SUPER far out of the money options, they're not really going to react to small moves in the stock price. Options that are close to the stock price tend to move and be more liquid, so there are a lot of factors that come into play, but if you're trading liquid stocks and options with narrow bid-ask spreads, those are going to be the most sensitive to changes in the stock price since the "fair market price" (mid price) is very clear. Wide bid-ask options are going to give you the most trouble, which is why we stay away from them.
wait, but my platform shows a lower number for volume for a particular strike, it is 43, but OI is 924. How is that possible then? Base on your explanation volume should always be higher?
Great video! Just curious in what case the option open interest is greater than volume?
Volume is the daily transaction counter, open interest is the pending contracts, so if there is a lack of activity that day, but many people with open contracts, OI could be greater than volume.
@@tastyliveshow is this good or bad?
@@imperialkingzent good lord bro
is there a way to figure out how many open interests for sell-call and sell-PUT ?
What would happen if x (new person) buys from matt will OI still increase? So it is basically number of open contracts seller sold. Am I right ?
how can you use this info on unusual options activity?
How about when trading spreads (verticals, butterflies, etc)? Do you just look at the open interest and volume of each leg of the spread ? On TOS they also show the OI and Volume of each spread.
I would just ensure each leg used in the spread has some activity - if you're trading well known stocks this won't be an issue really, but if you're trading obscure stocks and/or obscure expirations (weeklies) then just double check that each strike has a narrow bid-ask spread and a decent amount of open interest. After that, getting filled quickly will have to do with the bid-ask spread and how narrow/wide it is. Narrow = good, wide = bad.
What do you mean you can't trade the underlying cash settled stocks like SPX? Unless I misunderstood, yes you can...but not the individual stocks.
If there is high put option volume at the strike price compared to the call volume at the same ATM strike price, would that be a higher probability of the underlying going up?
Nope - that just means there is more activity at that strike, that doesn't mean that investor knows what's going to happen.
Hi, how can we find out if open interest has increased or decreased from previous trading day ?
Super important, I have been at my profit target for 2 days straight but no liquidity to close it out. :(
The closer you get to the natural price, the higher your chance at getting filled.
Did you close it?
Im still not getting it.. if I close out my option order before the target date, then what happens if I do that, In stead of waiting for it to getting fill at the target price? Thanks in advance
suggestion: Can you provide a link to the video he's talking about at the end of the video? If you did I'd immediately click to watch it.. now i have to search for it
wow you probably saved a lot of lives with that advice
no one does it it better!
One question. Pls help.
Future Open intt at end of session as per Daily Chart and 5 min chart why showing different figures.
As I did not get reason even after searching.
I would shoot a screenshot to support@tastyworks.com - they'll be able to clarify for ya!
Where on RH or Webull would you see “open interest” ? Or do you see that on a different platform or app?
Click on bid and ask icon
Great video. However, what I didn't get was if as per your example; Sarah buys 5 contacts from Joe doesn't that mean that those 5 contacts got closed?
In this example, Sarah buys 5 contracts to open, and Joe SELLS 5 contracts to open. If you go down a few lines you'll see that Joe buys back one contract from Sarah, and that closes 1 contract which is why open interest goes down.
Can retail traders open new contracts or do they simply trade with existing open interest and affect overall volume?
Great question! Usually we don't deal with this because we are working with very liquid underlyings that have pre-existing contracts ready to be paired with our open or close order, but if there are none and we put an order out there to sell a put for example, and someone else places an order to buy a put, a contract would have to be created for the transaction to take place and that would add 1 contract to the open interest total.
Hi everyone!
Can someone clarify this for me..
Min. 8:30 why is it flat when matt buys for sarah and no when joe buys from sarah?
On that case it was -1, WHY?
Sarah would be closing one of her initial 5 contracts, and Matt would be opening one, which is why the transaction wouldn't change open interest. One pending contract comes off the market, and one enters the market here.
@@tastyliveshow Hi! It was a nice presentation to explain OI, but I believe that the above case mentioned at 8:30 should have been -1 since a contract is going out of the system.
@@tastyliveshow HOW MIKE, IN THIS 4th TRANSACTION MATT BUY BACK ONE CONTRACT INSTED OF TWO AND SARAH SELL ONE CONTRACT INSTED OF FOUR ......HERE WHERE HE (MATT) OPEN A NEW CONTRACT ,I DONT UNDERSTAND PLS .......
If open interest increases significantly on a short term expiration call or put . Does that move stock prices?
It would not - only buying and selling stock increases & decreases the stock price - the option market is a derivative market of that stock, so they are separate markets.
In regards to open interest, are these contracts closed only when you buy them back from the person you sold them to? Whoever that might be. What if that person has already sold those contracts but you buy from him/her some others that were already acquired. Does that increase or decrease open interest?
You'll never know who the order is going to, so I would say volume and open interest are much less important than bid-ask spread. With that said, if a contract is being closed overall (buy to close being matched with sell to close) that would decrease open interest.
I am finally getting this stuff now, been running away from it for weeks so thanks, but how comes open interest dropped to 6 in the tally when Joe buys back one call from Sarah? Shouldn't that stay flat at 7, as the open interest is still there caused by Joe's buy back, and it was not Sarah who closed the trade by selling the one contract without any open interest?
For the sake of this example, we're assuming that they are both closing orders, in which case the open contract would be closed and there would be a reduction of one open contract. The idea is to realize that volume only goes up, as that is transactional, but open interest can and does go up and down depending on the open & pending contracts available.
@@tastyliveshow How would Joe be closing? He is buying back his contract, isn't it still open?
@@sevarchy he sold to sara, so he has -5 open (or short five), then when he buys back one (+1), he now has only -4 (-5+1) open, thus effectively closing his one short call contract.
Should we interpret option chain data based on option writer's perspective???? I mean.......if Call option open interest is 10000 it means there are 10000 contracts first written and to be bought????? OR 10000 contracts first bought and waiting to be written???? Pls help
I didn't get this. You said @ 7:55, "... Matt is buying to open, and Sarah is selling to close..." Nothing suggests that Sarah is selling to close, correct? She could be selling to open.
hi, teacher! i still confuse what means open interest. you say sarah buy 5 call from joe, add 5 open interest. but why matt sells 2 put to laura, open interest need to add 2? what i think, we say open interest, it is under specific action relate to same underlying liquidity. for example, aapl jan 18 2019 call 200 open interest, aapl jan18 2019 put150 open interest. but you add sarah buy 5 call and mat sell 2 put into same basket, that is different action?
These examples have more to do with showing how opening and closing trades match up with each other. At the end of the day, we don't dig into the details like this, we just look at open interest for the strike and expiration we're interested in and look for high numbers.
@@tastyliveshow thanks!
How do you know if the open interest is up due to short contracts?
someone pls answer this. How come OI change on any day be More than Volume for the day?
Because OI refers to the amount of open contracts out there - if a ton of people place orders to close their contracts, it would increase volume as that is the transaction count, but decrease OI because less contracts would be open.
I have one confusion . volume in future stock shows lots or no of share
How can you check for open interest and volume on your platform?
On the trade page you can change the columns next to the bid-ask spread to a number of different metrics, including OI and V
Doesn't open interest remain unchanged when I am buying from someone other than the market maker? If I am buying from someone other than market maker wouldn't it mean that they are closing the position?
I feel that you eventually took the same position but at the start of your example about the trading day where Sarah buys calls from Joe, I think the open interest should be 0.
It doesn't necessarily mean they're closing the position - if you sell to open you could be matched up with someone else buying to open which would create an open contract resulting in +1 open interest.
Hey bro i am confused why you added put volume to the call volume 2+5 i believe call and put volumes are different
They are different - this was just to show a very basic level of how volume works in general from a total volume perspective.
What matters more? higher volume or higher oi?
Is open interest (OI) for CALLS and PUTS calculated separately or inn same bucket?
How do I interpret the following data, Volume for the day is 400K and change in OI is 600K?
For each strike, OI and volume are separate. It sounds like whatever you're looking at is totaling all contracts.
In your definition of open interest, you said that it refers to contracts that are "not assigned". Does that mean that no one currently owns those contracts?
It does not - it just means contracts that are open and pending. If a contract is assigned, like an ITM option with low extrinsic value, that would be removed from the open interest since that person now owns long/short stock.
So someone has to exercise the contracts for them to be removed from open interest@@tastyliveshow
So if I get it right, should a random dude buy 2 calls from Sarah the OI will remain 6 as well?)TY
If I sell calls, does that number get added to the open interest? And if so, how do I know the open interest amount was from someone who bought calls and someone who sold calls? Example: if I see that the open interest is 5000, was it from someone who bought 5000 calls or was it someone who sold 5000 calls?
Brah how’s someone gunna sell I without a buyer😭
Which app or web time that will track oi and doi. Please help.
Most brokerage firms offer this information on the trade interface - we use tastyworks.com and you can see open interest and volume for every strike right on the trade page.
I don't get it. Why selling put option have increased the volume of the Call option?
So confused... So if I Buy to Open 10 calls of AAPL, someone has be to Selling to Close AAPL for me to buy it. Why isn't OI always zero then. You can't have someone opening a trade without someone else closing it.
Hello, Thanks for the great explanation.
What if I buy a long call with zero interest @400 days and zero volume.
After 30 days, I wish to exercise because the price goes up.
However, there's still showing a zero interest and zero volume.
In this case, can I actually close the long call option ? I'm kinda confused.
Thanks for your reply.
If there is no activity in the option you might have a hard time closing by selling out of it if you're long. If the option is ITM then it must be worth something, so it's easier to close by selling this way. In any case, if you want to exercise the long call that's ITM you can do so through the broker.
how can you have more open interest than total volumes sometimes?
Open interest is the number of pending or open contracts that exist, so if there is a low activity (volume) day, open interest can be higher than volume - this is actually pretty common.
If an option shows high interest and volume, then why does my order never get filled when my price is close to bid/ask ??
What strategy are you routing? If it's a defined risk one like an iron condor, they have a harder time getting filled from the get-go because all legs have to be accounted for. If you went to the bid or ask exactly you should get filled, but that isn't necessarily a "good price", so we typically let them sit on the price we want for a bit.
How is joe buying contracts from Sarah closing a interest since joe now holds it ? 6:52-6:57?
Open Interest and Volume are separately calculated for each option strike, date, and type(call/put). In your example, #1 Sara buying give calls and #2 Matt selling two puts shouldn't actually increase the volume and OI. They both are accounted separately. Are you taking a generic example or the video is wrong?
OI is down and it means there is closure of open contracts. But how is it possible before expiry?
Your concepts of volume vs. open interest is accurate but your example is wrong because you are calculating calls and puts as if they were in the same open interest count, but they are not. There are two types of options contracts, calls and puts, so there is an independent open interest count for each.
thanks!
Open interest is not updated real-time during the trading day. They maybe closed by the time you see it during the trading day.
If I sell a put and no one buys it can I let it expire for profit?
open interest is often larger number than volume. How does it happen?
Calls and puts mixed???
Calls and puts have different open interest values..
I don't get the significance of open interest if these contracts can be created on a whim.
I would suggest you use the terms "buy to open", "buy to close", "sell to open", and "sell to close", instead of simply "buy" and "sell", because otherwise, your explanation will really confuse ppl, especially beginners. The following are my further explanations.
If a trader tries to buy (no matter to open or to close) a contract, then where is it from? Of course, from someone who tries to sell (again, no matter to open or to close). Indeed, there are four cases corresponding to different open interest (OI) changes.
1. a "Buy to Open" paired with "Sell to Open" gives a +1 change in OI (assuming trading for one contract, the same in the following)
2. a "Buy to Open" paired with "Sell to Close" gives a zero change in OI, bcs the increase from the buyer and the decrease from the seller in IO offset.
3. a "Buy to Close" paired with "Sell to Open" gives a zero change in OI, for the same reason as point 2.
4. a "Buy to Close" paired with "Sell to Close" gives a -1 change in OI.
Now, if we check the four examples you mentioned in the video (see from 4:04 to 8:50), your first two examples are in my case 1, your third example is in my case 4, and your last example is in my case 2.
Of course, in the real market, we will have many traders opening or closing many many contracts. A simple rule is that if the number of open contracts is more than that of closing contracts in one day, then the OI will increase (on that day); if less than, then decrease. And note that volume is reset to be zero at the market close every day (and recount from zero on the second day) while OI is a cumulative number updated every day before the market open (so during the trading hours it is static). Attentive traders may ask "How can the number of closing contracts be less than that of the open contracts? After all, you will have to open first and then close, indicating the number of open should be >= the number of closing". Well, this point is correct if we look throughout the lifespan of a ticker (e.g., AAPL220218C170), assuming at expiration all contracts are closed or exercised/assigned. However, don't forget that the OI is updated once every day. So in one day, it is very possible that the number of closing is more than that of opening, giving a declining OI on the second day before the market open.
It is important for a trader, especially a day trader, to consider the OI together with implied volatility (IV), volume, the "Greeks", and the stock price (change) before making a trading decision. Good luck!
U slightly sound like suga sean
quite a few incorrect bits of information.. @ 5:11 - makes no sense. Selling the 2 put options would not affect the OI tally from the call options. If Matt sells 2 puts to Laura there should be a separate column for OI for the put option, you can't add them up with the previous 5 OI which was for the call option... @7:46 - incorrect. Sara isn't short 4 calls. She's long 4 calls...
The tally in the upper right corner is just the total volume and total open interest for all options traded - it is up there to show that volume just keeps tallying, but open interest can go up and down depending on how many outstanding contracts there are.
He is right, a put transaction would not affect the the call open interest. Separate contracts, each with separate open interest totals. This is where you confused people.
7:46 why is he saying "Sara is already SHORT 4 calls?" She BOUGHT 5 calls from Joe so she was 5 Calls LONG. Then closed one with Joe. So she is now LONG 4 Calls - why is he saying short goddamit! Everything was goin fine untill he said "she short 4 calls.. " somebody please tell me what am I missin here, how the hell is she SHORT 4 calls when she frikkin BOUGHT them!
white boy mike!