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What is the difference between volume and open interest?

April 26, 2017volume

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What is the difference between volume and open interest?

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Volume is the number of contracts of a particular option contract that have traded on a given day, similar to it meaning the number of shares traded on a particular stock on a given day. Open interest is the number of option contracts for a particular stock at a specific strike price and a specific expiration date that were open at the close of trading on the prior trading day. While some traders look at this information as an indication of liquidity of a particular option or option chain, a more reliable indicator may be the tightness of the bid / ask spread. A common misconception is that open interest is the same thing as volume of options and futures trades.