Module 1 · Options Levels Basics
Open Interest vs Volume
A stock of open positions vs a daily flow of trades.
In this lesson you'll
- Define open interest and volume precisely
- Understand why a trade may or may not change OI
- Know why OI matters for levels
A single trade can raise OI (two parties open new positions), lower it (both close), or leave it unchanged (one opens, one closes). So high volume does not automatically mean rising OI.
Why it matters: a strike with large OI is a big book of contracts whose sellers (often market makers) carry directional risk they must hedge in the underlying. That hedging is the mechanical link between OI and price that the rest of the course explores.
Key takeaways
- Volume = contracts traded today (resets daily); OI = open contracts outstanding (a running stock).
- A trade can raise, lower, or not change OI — high volume ≠ rising OI.
- Large OI at a strike = a big book someone must hedge.
- That hedging links OI to price (Modules 2–3).
Check your understanding
Pick an answer to reveal instant feedback. Answer every question to complete the lesson.
Why that's off: They are distinct — a flow vs a stock.
Why that's off: It's reversed: volume resets, OI is cumulative.
Why that's off: Volume counts both calls and puts.
Volume is the day's trading activity (resets each morning). Open interest is the running count of contracts still open. They measure different things.
Why that's off: It's common — volume and OI measure different things.
Why that's off: No need to assume fake volume; closing trades explain it.
Why that's off: OI and volume are independent quantities.
OI only moves when net new contracts are opened or closed. Heavy volume that mostly closes/rolls existing positions can leave OI roughly flat. High volume ≠ rising OI.
Educational content only. Nothing here is financial or trading advice. Order-flow and options patterns shift probabilities; they never guarantee outcomes.