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Futures – Volume and Open Interest

  • Volume – Total number of purchases / sales during a trading session. (total no of purchases should equal the total no of sales)
  • Open Interest – Total number of futures contracts in a market that remain “open” at the end of a trading session. i.e. number of outstanding long or short futures contracts (not yet terminated)
  • The clearinghouse publishes these data every day
  • Futures Commission merchant (FCM) – handles future contract orders (clearing members of the exchanges)

Example
  • What happens to the open interest and volume:
  1. When a new buyer and new seller each are taking a new position (long and short respectively)?
  2. When an existing long position takes an offsetting position (i.e. short position), and a new buyer takes a long position?
  3. When an new seller takes a short position , and an existing short position offsets his position?
  4. When the buyer and the seller are offsetting existing long and short position.
  5. When an existing short position makes a delivery to the long position at maturity.
     
Solution
  1. Open interest increases
  2. Open interest remains same (an existing contract is transferred from one entity to other)
  3. Open interest remains same (an existing contract is transferred from one entity to other)
  4. Open interest decreases
  5. Open interest decreases

Note: the volume increase in all the above scenarios, except in (5)
 

 





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