According to the first bullet point in this explanation, "In the stock market, open interest is the number of buy orders submitted before the market opens. When the open interest is high, people are ready to add shares to their positions or initiate new positions, which means that the stock is likely to go up in price."

Is this definition mistaken, or does open interest for non-derivative securities actually count the number of buy orders? It would seem to me to make much more sense to count the number of shares which are in buy orders instead. The definition as stated would mean that open interest would depend on whether a single large order or many smaller orders are placed, holding the number of shares constant. If this definition is accurate, then why is the number of buy orders rather than the number of shares which are in buy orders the correct thing to count?


1 Answer 1


In my opinion, your intuition that their definition is crap is correct.

Google doesn’t give me another source that uses this definition either.


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