In one of the previous articles on the reports of the Chicago Mercantile Exchange, I casually mentioned traded open interest. Therefore, today's review will be a kind of continuation of the topic started earlier, since on its pages we will try to reveal the basic provisions of the analysis of OI.

Let's start with definitions. Open interest (OI, OI) on the exchange is understood as the number of active futures contracts, in other words, it is the total volume of short and long positions opened on an asset, the maturity of which has not yet come.

A forward contract is a special financial derivative that involves the delivery of goods or mutual settlements between the parties under predetermined conditions.

As a rule, this term refers to various contracts, but within the framework of today's topic, we will only be interested in futures and options, i.e. instruments traded on the stock exchange.

Where to look for traded open interest

This information is not "secret" and is available to every trader who has an account opened on the derivatives market, i.e. in the general case, only the functions of the trading terminal will be sufficient to obtain the corresponding indicators.

The only thing I can advise is to use special resources on which you can build an OI chart for currency futures, in particular, I use the site http://www.barchart.com/.

Traded open interest analysis

To learn how to read the OI and the price, you first have to understand the mechanism of its calculation, i.e. with "technical" reasons for which the indicator grows or decreases. Practice shows that one of four typical situations occurs in the market at any given time.

The first is that if the buyer of an asset (in our case, it is a futures for a currency) opens a new long position, and the seller increases the short position (that is, not just getting rid of the previously purchased contract, but playing for a fall), the traded open interest increases.

For a novice Forex trader, such an interpretation may not seem entirely clear, but there is nothing complicated here. The most important thing to remember is that in any market, the buyer always interacts with the seller, i.e. if someone increased the long position, it means that someone sold the contract, i.e. acted as a competitor.

Thus, when bulls and bears begin to open positions aggressively “against each other”, the number of active contracts increases, i.e. the market is getting bigger.

To better understand the situation, consider a simple real-life example. Suppose factories in region N sell fittings to local customers. Under normal conditions, the market is stable, i.e. old, long-familiar contractors interact on it.

Then a certain holding begins to build a large stadium, as a result of which the demand for metal grows to a level that local manufacturers cannot satisfy. This situation attracts new rebar suppliers from neighboring regions.

Thus, it can be argued that the traded open interest has increased, as the number of concluded contracts for the supply of products has increased. The same thing happens in the stock market, only futures and options play the role of goods here.

The second situation is if the seller fixes financial results on a previously opened short position, and the buyer closes the old long, the ROI decreases.

In this case, the market capacity decreases, i.e. bidders lose interest in the asset. If we return to the example with reinforcement, then a similar situation will be observed in real sector after the completion of the stadium.

The third situation - the buyer increases the long, and the seller fixes the profit on the previously opened long position, i.e. he sells the available contract to someone who wants to buy it.

In this case, the traded open interest does not change, since the market volume remains the same, i.e. this is the same as the formal resale of rebar from one warehouse to another, after which the actual supply and demand remain unchanged.

And the last situation(fourth) is similar to the previous one, only in this case, the bidders "exchange" a short position, so the OI remains unchanged.

Thus, according to the dynamics of open interest, one can judge the strength of the trend, so further analysis is reduced to comparing the trend and the OI indicator, in particular:

• If the price and the traded open interest are growing - the bulls are gaining strength, the upward momentum is likely to continue;
• If the price goes down and OI grows, then a bearish trend is relevant, it is reasonable to sell the asset;
• In the event that interest falls, it is safe to say that the current trend is weakening;
• A stable value of OI most often indicates a continuation of the previous trend, although such dynamics can also be observed in .

In addition, practice shows that before a trend reversal, there is often an anomalous surge of open interest, so this signal can be used both to conclude countertrend transactions and to find exit points from a previously opened position.

In conclusion, I would like to note that the analysis of traded interest should be carried out on daily charts, since intraday OI fluctuations do not carry any semantic load and are subject to the “speculative” factor. In addition, CME public reports accumulate data only after the close of the trading session.

To smart lab. This time we will talk about open interest.

In the futures market, unlike the stock market, there is another important characteristic: open interest . This is the so-called number of "open contracts". In order for you to be able to buy a futures contract, there must be a person who will sell it to you. At the time of the transaction, an “open contract” arises between these two people. Thus, the higher the "open interest", the greater the number of people involved in the game.

For a better understanding, you can consider the situation on a specific example. Let's say the current open interest is 500,000 contracts. What does it mean? This means that, in general, 500,000 transactions have been concluded, and at the moment the price of the futures contract rises by 1 ruble, 500,000 rubles flow from the pocket of the “sellers” into the pocket of the “buyers” in the form of a “variation margin”. Unfortunately, "open interest" says nothing about the qualitative structure of sellers and buyers. That is, it can be 500,000 people who bought under one contract, or 1 large buyer who bought 500,000 contracts.

Now let's try to understand how this can help in making transactions. To do this, imagine a hypothetical situation with one "open contract". In the event of a strong rise in price, a certain amount will pass from the hands of the “seller” to the hands of the “buyer”. At some point, the “seller” may not have enough money to ensure the profit of the “buyer” and he will have to close the deal, that is, buy back this contract from the buyer at a higher price (analogous to a margin call). At the moment of closing the transaction, the former seller becomes a buyer, since in order not to become bankrupt he needs to close the losing transaction as quickly as possible. Now suppose that we have not one such seller, but 100,000 people, respectively, these 100,000 people are ready to close their losing trades at any price in order to prevent losses. Thus, in the case of high "open interest" and a strong move up at some point in the market, there is a rush due to the fact that a large number people suffering losses have to buy back their losing positions and the more of these people, the stronger the hype at this moment, accompanied by an increase in price.

There is another important point, we should not forget that at the time of strong movements, one of the parties (“sellers” or “buyers”) receive significant profit, which can also be used as leverage in order to disperse the price even more.

Let's summarize. If you are planning to purchase from certain price levels, which you consider strong enough, you need to pay attention to the "open interest", if it falls - the potential for movement is low and your levels are highly likely to hold, if it grows - it's worth considering, because a high "open interest" can give momentum to the movement, enough to break the level.

In other words, "open interest" can be compared to the mass of a cannonball flying into a wall. In the case of a small mass, the core will most likely bounce off without leaving significant damage, but if the mass exceeds all conceivable values, then only memories will remain from the wall, as well as from its defenders.

Market sentiment is the single most important factor that drives the forex market, and gauging market sentiment is one aspect of trading that is often overlooked by traders. While there are quite a few ways to evaluate what most market participants think or feel about the market, in this article we will look at how to do this using interest analysis.

Open Interest in Forex
Open interest analysis is not uncommon among those who trade futures, but it's a different story for those who trade spot forex. One of the most important points One thing to note in the forex spot market is that information relating to open interest and volume is not available because transactions are over-the-counter and not through exchanges. As a result, there are no records of all transactions that took place or are taking place in all the back alleys. Without open interest and volume as vital indicators of the strength of spot price moves, the next best thing is to look into open interest data on currency futures. (For related reading, see Getting Started with FX Futures.)

SpotFX Vs. FX Futures
Open percentage and volume data on currency futures allow you to assess market sentiment for foreign exchange market futures, which also affects the forex market. Currency futures are basically spot prices that are adjusted by forward swaps (derived from differences in interest rates) to get the future delivery price. Unlike spot forex, which does not have a centralized exchange, currency futures are cleared on exchanges such as the Chicago Mercantile Exchange (CME), which is the world's largest market for exchange-traded currency futures. Currency futures are usually based on standard sizes contracts with a typical duration of three months. Spot forex, on the other hand, involves a two-day cash transaction. (To learn more, see Futures Fundamentals.)

One of the many differences between spot forex and currency futures is their quote. In the currency futures market, currency futures are mainly quoted as foreign currency directly against the US dollar. For example, Swiss francs are quoted against the US dollar in futures (CHF/USD), as opposed to the USD/CHF notation in the spot forex market. Therefore, if the Swiss franc depreciates against the US dollar, the US dollar/CHF will rise and the Swiss franc futures will decline. On the other hand, EUR/USD in spot forex is quoted in the same way as euro futures, so if the euro is valued in price, euro futures will rise as EUR/USD rises. (See Forex Market for details.)

Spots and futures prices for currencies (rather than currency pair) tend to move in tandem; when the spot or futures price of a currency rises, the other also rises, and when it falls, the other also tends to fall. For example, if the GBP pound futures price rises, then the GBP/USD spot rises (as the GBP gains strength). However, if the price of CHF futures rises, then USD/CHF will decline (because CHF is gaining strength) as spot and CHF futures prices move in tandem.

What is open interest?
Many people tend to get open interest mixed with volume. Open interest refers to the total number of contracts entered into, but not yet settled, by transaction or delivery. In other words, these contracts remain unresolved or "open". The open interest that a trader holds can be called the trader's position. When a new buyer wants to create a new long position and buys a contract, and a seller on the opposite side also opens a new short position, open interest increases by one contract.

It is important to note that if this new buyer buys from another old buyer who intends to sell, the open interest does not increase because no new contracts have been created. Open interest decreases as traders offset their positions. If you add in all of the long open interest, you will find that the total number is equal to all of the short open interest. This reflects the fact that for every buyer there is a seller on the opposite side of the transaction.

Relationship between open interest and price trend
In general, open interest tends to increase when new money is poured into the market, meaning that speculators bet more aggressively on the current market direction. Thus, an increase in total open interest tends to support the current trend and generally indicates a continuation of the trend, unless changes in sentiment are based on an influx of new information.

Conversely, overall open interest tends to decrease when speculators pull money out of the market, showing a change in sentiment, especially if open interest was previously interested.

In a sustained uptrend or downtrend, open interest should (ideally) increase. This implies that longitudes are in control during an uptrend, or shorts dominate in a downtrend. Decreasing open interest serves as a potential warning sign that there may be a lack of real power in the current price trend as a significant amount of money is not flowing into the market.

Therefore, as general rule, rising open interest should indicate a continuation of the current price movement, whether in an uptrend or downtrend. A decline or flat open interest signals that the trend is waning and likely nearing its end. (To learn more, check out Open Interest Detection - Part 1 and Part 2.)

Sharing in Forex Trading
Take, for example, the period between October and November 2004, when the euro futures (in candlesticks) entered into a higher high and higher low trend (as seen in Figure 1 below). go for the euro, whether it is trading breakouts of resistance levels or trading bounces off the daily trendline. You can see in the bottom window that the EUR futures open rates have gradually increased as the EUR rose against the US dollar. Note that the EUR/USD spot price movement (visible as the blue line) has moved in tandem with Euro futures (candlesticks). In this case, rising open interest accompanied the existing medium-term trend, therefore, it would give you a signal that this trend is being supported by new money.

Figure 1: Composite daily chart of EUR futures (candlesticks) overlaid with exact EUR/USD prices (blue line).

From the article you will learn:

Greetings, dear readers of our site. In this new article we will talk with you about trading volume and open interest. I think many will be interested to know how these two concepts are combined.

I want to say right away that open interest and trading volume are the key to price movement. But at the same time, in order to understand this in depth, you should definitely understand what open interest is, what trading volume is and what is the relationship between them.

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Personally, I think that it is volume and open interest that are important, but at the same time underestimated tools within the exchange. In fact, ignoring these tools is a very gross mistake. It is a clear understanding of these data that gives us the opportunity to realize the true mood of the market.

Both volume and open interest are excellent indicators.

As a rule, it is much easier to understand volume indicators than open interest, because volume is a direct reflection of people's need to make deals. As a rule, if a trader asks why the market went up, then with a greater degree of probability he will receive an answer, they say, there were more buyers, so the upward movement has passed.

At first glance, this answer is indeed exhaustive. But the very essence of the question lies much deeper. Let's judge logically, for any trade request there must be a counterparty, that is, for each buyer who wants to purchase an asset at current price, there must be a seller who will be ready to sell this asset at a given price. The logic of open interest is well known in practice. about which speaking for themselves.

I think that if you were asked why the price is rising, then it would be more detailed to answer in the spirit of, they say, buyers were more motivated and active, which is why the price increased. Do you understand the logic of the price increase? That's how .

Volume directly correlates with the need of people to make trades. High volume tells us that people really have an interest in the asset. A large volume tells us that people are investing money in an asset. Yes, the volumes and needs of people are connected, and what patterns do they demonstrate.

There is no open interest or real volume in forex

Let's be frank, if a person has no interest in an asset, then he is unlikely to invest in it. I think you guessed it, just like with volume, there are no indications of open interest in the forex market. Yes, and open interest and real volume are absent in Forex, but we are considering stock market, and futures, and here, .

You can always clearly assume that a system based on the use of trading interest and volume will work, and well. Those who actively followed open interest or volume noticed that they can tell us in advance where the price might move. And since they are excellent indicators, you can try on.

We often see volume increase when the market wants to make a breakout move. In turn, if in a rising market we see an increase in volume, but a decrease in open interest, this may be a sign of an approaching peak.

It is logical to assume that the pressure of buying or selling in terms of assessing open interest and volume can be no less effective than using the same graphical constructions. However, I personally believe that volume and open interest can be considered confirmation of our beliefs, but they should not give rise to these very beliefs.

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The Wisdom of Using Open Interest

Roughly speaking, in my opinion, the use of volume and open interest is effectively consolidated within some trading strategy as a confirmation tool. For a better understanding of the issue, I would like to narrate from the point of view of the futures markets, because these two concepts relate to the forex market insofar as. And since we are talking about futures, then I think it will be in the subject.

Competent analysis of volume in the futures markets has always had many difficulties. This is primarily in the context that the formation of volume takes place all day, respectively, if a trader wants to use it in a timely manner, then he will have to put up with a delay. We go a little to the side, but we also need tools, so the topic will be very useful.

It is often said that the volume can clearly filter out whether there will be a breakdown of the level or not. In fact, this is not the case, we can only see a rebound or breakdown after the fact, but we cannot predict this in advance. That is why I say that open interest or volume should be used strictly within the framework of the strategy.

You must understand that open interest and volume have a certain relationship, it is these two components that underlie the price movement. Now I will try to you plain language explain how volume and open interest fit together.

The next few paragraphs are key to this topic.

Let's say prices and open interest go up. This indicates that there is an infusion of money into the market by buyers. If you think that in this case there are more buyers, then this is a mistake. No, it's just that buyers are more motivated and interested in further growth in asset prices.

Take a situation where prices are rising and interest is declining. In this case, many buyers no longer actively appear on the market and money leaves the market. Here it is worth understanding that a possible market reversal is approaching, because the price will not be able to grow without the influx of volume. This is the purest bearish sign. In this case, we must understand that a possible maximum of the market is approaching.

Let's take a situation where prices are falling and open interest is rising. In this case, it indicates the strength of the bears, as there is an influx of money, indicating to us the pressure from the sellers.

For example, we see that prices are falling and open interest is starting to decline. In this case, the sellers understand that selling the asset further is no longer so expedient, because the price is already low. This is a sign of the weakness of sellers, therefore, it can be assumed that the market will soon find a bottom and a reversal will occur.

As you can see, there is a logical relationship between volume and open interest. Before a market participant starts to inject money into the market movement, he must have an interest. It would be logical to assume that no one will invest money if there was no interest.

conclusions

Overall, volume and open interest can be an interesting addition to your system. Within the forex market, you must understand that this data is not available, but it can be used with futures contracts, in general, get out, if there is such a desire.

We talked about what open interest (OI) is, where and how it is formed . If you have read the previous publication, you know that open interest is formed only in futures markets (futures and options). Today we will continue to deal with open interest.

In this article we:

• Let's consider how open interest reflects the mood of market participants.
• We will indicate where you can get data on the positions of various groups of traders.
• Learn how to use open interest to trade on the stock exchange.
• Using specific examples, we will show the regularities of OI, which improve the understanding of the market situation.

Open interest on the Moscow Exchange

Each futures contract (be it a future or an option) has a maturity date and an expiration or expiry date. The exchange is designed in such a way that several futures or options contracts with different expiration dates are traded simultaneously. But the contract with the closest expiration is considered the most liquid.

Let's consider this on the example of the Moscow Exchange. For information about open positions, go topage “Derivatives Market Instruments” on the website of the Moscow Exchange.

All tools are available to traders here derivatives market. A specific tool can be found in the tool code search:

Filter the tools you need and go totool parameterswhere open interest data is available.

The figure below shows open interest data for the Si futures contracts outstanding:

In the last column "Open. positions” just indicates the number of mutually open positions total for all participants. Contracts are arranged in ascending order, i.e. the first contract has the closest expiration, the farthest has the furthest. The largest value of open interest is in the contract with the nearest expiration - 2,332,932. This figure means that at the moment 1,166,466 contracts are open long, and the same contracts are open short. The lowest value is on contract Si-9.21, i.e. with the farthest expiration.

How open interest is formed

Let's see on the chart how open interest is formed on the example of a contract with the largest value of open positions SiZ9:

You may notice that a sharp increase in open interest begins in the second half of September, around September 16-19. This is due to the fact that the previous SiU9 contract has the last circulation date on September 19th. Many traders are switching to new contract just a few days before the previous contract expires.

Here is an example of how open interest changed on the previous SiU9 contract:

Thus, the open interest changes from the previous contract to the next one. From this we can conclude that the maximum open interest is always formed on the contract, which has the closest expiration date.

Similarly, you can explore information about open interest from the option market of the Moscow Exchange. To do this, follow the link:https://www.moex.com/en/derivatives/optionsdesk.aspx . Select the code of the desired tool and click "Show". You will receive a report on open positions in the following format:

From this report, you can also see how many open positions accumulated on each call and put option strike. (What are options - ).

Open interest for CME

For the Chicago Mercantile Exchange, the values ​​of open positions of derivatives traders are also available. They can be viewed on the official website. www.cmegroup.com.

An example of open positions on futures 6E:

In the Open Interest section, you can track not only the current value of open positions, but also fix changes compared to previous trading sessions (Change column).

The Chicago Mercantile Exchange, in addition to the general value of open interest, publishes a COT report, which stands for Commitment of Traders or Commitments of Traders. This report contains open interest data for various groups of traders and is published every Friday afternoon, based on positions posted the previous Tuesday. For convenient analysis on the CME website, such a report is published in the form of a diagram and is available at this link :

This report allows you to analyze long and short positions of various groups of traders with a relatively small time delay.

The report provides the following classification of traders:

• producer (manufacturers and suppliers of physical goods. They mainly take a short position in order to sell goods or products);
• swap dealer (dealers and market makers in the swap market);
• managed money (money managers);
• dealer (market makers, banks, swap dealers);
• asset manager (institutional money managers);
• leveraged (leveraged hedge funds);
• other reportable (not included in any category);
• largest traders (largest traders).

Open Interest in the CL Oil Futures Market

For different futures, there are specific ratios of groups of traders. Consider the example of a CL oil futures position of managed money:

It follows from the constructed diagram that as of October 15, 2019, managed money has 211,183 open long positions, against 120,721 short ones. This indicates that the majority of managing investors expect oil prices to rise, so they are holding more long positions.

Perhaps the main drawback of this report is its belated publication. However, the inertia of the market allows such reports to be usefully used despite the delay in time. Large traders and hedge fund managers, as a rule, build up their positions in advance, so if the market has not yet won back the expected event, you can focus on this in your trading.

Where to study CME data on options open interest

In order to study the data of the CME exchange on open interest from the options market, go to by this link . And choose the type of report from the options presented.

We will consider how open interest is formed on oil options. Let's do this using the OI&Settle Detail report as an example.

In the figure below, the volume histogram shows us on which strikes and in what volume there is open interest for the LOZ9 contract.

From the presented report, we can mark strikes with maximum volumes, and taking into account the premium paid for options - to calculate the levels of support and resistance - this is already a topic for a separate article. Now our goal is to show you where and how to analyze open interest.

The peculiarity of publishing data on open interest on the CME does not allow analyzing the change in open interest within a day. From a technical point of view, real-time open interest accounting does not present any problems today. After all, this has already been implemented on the Moscow Exchange and works great. It remains only to assume that exchanges deliberately do not provide such data to the public, since they are of high value and allow you to track the behavior of large market participants in the market, notice places of accumulation and reset of positions.

Unlike CME, open interest data on the Moscow Exchange is available in tick mode. That is, the data for each transaction contains information about the change in open interest, and any transaction that is broadcast in the data feed shows not only the direction and volume, but also the value of open interest.

This way we can see each trade and its impact on open interest. With this data, you can track price segments where exchange participants open or close their positions.

And at first glance, it may seem that having such data is quite easy to determine where the price will go. But in practice, everything is much more complicated.

Setting the open interest indicator

Let's consider how the open interest indicator in the ATAS platform allows you to track large intraday savings. To do this, set on the chart of the futures contract SiZ9 a pair additional indicators: Delta and Open Interest. In the Open Interest settings, set the bar mode (as in the figure below), and leave the Delta indicator settings as default.

The bar-by-bar open interest mode allows us to abstract from the big picture and explore the changes in open interest for each bar. If the bar has just begun to line up, then the ROI will be equal to zero, and by the time the bar closes, the ROI will be positive or negative, which means either an increase in the ROI or its decrease.

We need the delta indicator in order to track the initiative of the buyer or seller in important areas. In the example below, we noted that proactive sellers were noticed in some bars (this can be seen from the Delta indicator), and their transactions led to an increase in open interest.

This situation tells us that both sides are building up their positions, but the aggressive seller is the initiator of the deals. We advise you to always pay attention to the appearance of such situations and subsequently note where the price leaves the consolidation zone (position set). By itself, the situation in which the seller is the aggressor does not yet tell us that the price should definitely go down. It is recommended to wait for the levels to appear, which would clearly indicate that the price is holding and help to make a decision.

In our case, after the seller's first aggression, the price tested a certain level, which later acted as a resistance level. It is desirable that these levels are formed in the zone where the initiator of the movement “mastered”. This way we will see if the initiator holds his position or not.

Volume and open interest analysis

Let's consider another method of using open interest, which allows you to determine who and who is "hunting". To do this, let's add the Big Trades indicator to our chart, which will fix the appearance of large purchases or sales:

At point 1, the price breaks through the support level, we fix the appearance of a large seller's trade, which may have opened its position in the direction of the continuation of the breakdown.

At point 2, the indicator showed an increase in open interest, and the price returned above the broken level. In this situation, the seller was in a trap. And the higher the price rises, the more losses for him. It is not difficult to assume that there will come a point where the seller will cover his loss.

As the observations for instrument Si show, the open interest on “trapped” positions is released in the same volume after about 200 ticks.

We assume that this dependence is due to the fact that market participants use margin leverage of 1:25, which, taking into account the size of the GI of this instrument, just corresponds to 175-200 points of movement that it can withstand.

Thus, we see that a significant number of sellers were caught on a false breakout of the level. We understand that we have about 200 ticks to go against this position. This allows us to open a position on the side of strong market participants.

In the event that the price breaks through the level and consolidates below it, this situation rather indicates that no one is hunting for the seller and most likely he knows what he is doing. In this case, it is advisable to open your positions in the direction of the breakdown on the retest of the broken level.

How to identify OTC transactions?

Derivatives market participants on the Moscow Exchange have the opportunity to make over-the-counter transactions. Such transactions do not go through the market and are made away from general trading at a price determined between the participants, so it is almost impossible to track such transactions. As a rule, the volume of such transactions is significantly higher than the average volume in exchange transactions. We proceed from the premise that if an off-exchange transaction goes through, it means that someone wants to hide it.

How to track such a deal? Two indicators will help us with this: Volume and Open Interest.

The thing is that if an off-exchange transaction led to the opening of mutual obligations, then this will be taken into account in open interest. From practice, it can be seen that the appearance of large OTC transactions is the beginning of any movement of the instrument, and the points of occurrence of such transactions act as support or resistance levels. It is especially common to observe the appearance of OTC transactions on the Ri futures from the Moscow Exchange.

Let's take an example of how to find an OTC trade on a chart.

On the chart below, we have highlighted the area in which we noticed a change in open interest by - 6424 contracts, while the total traded volume in the candlestick corresponds to 1588 contracts.

First, open interest allows you to understand what certain market participants expect. For example, foreign hedge funds conduct a thorough analysis when selecting instruments for trading. By opening positions in the direction of smart money, you make your work easier by relying on the opinion of experts in this field.

Secondly, open interest allows you to build your intraday strategy based on the levels where large accumulations occur.

Thirdly, by analyzing the open interest from the options market, we get additional information about the levels at which the maximum volumes have been accumulated, which can act as support and resistance levels.