Volume and Open Interest
Chapters in this video
- 0:00 Volume resets to zero every morning
- 1:17 Open interest: cumulative contracts alive right now
- 2:35 Scenario one: both sides open, so open interest increases
- 3:06 Scenario two: one opens, one closes, so open interest is unchanged
- 4:48 Scenario three: both sides close, so open interest decreases
- 5:14 The exam trap: high volume with falling open interest
- 5:58 Rapid-fire exam recap
What this video covers
- Why volume resets to zero at the start of every trading day while open interest carries over as a cumulative figure
- How open interest increases only when both sides open new positions, and decreases only when both sides close existing positions
- Why a contract changing hands (one side opens, one side closes) leaves open interest unchanged, even though volume rises
- The role of the Options Clearing Corporation (OCC) as the official scorekeeper and why its morning-after report makes open interest a lagging indicator
- How to spot the exam trap that high volume does not automatically mean rising open interest, including the panic-day scenario where volume spikes and open interest plummets
- The exact transaction matrix for Carla, Riley, and Sam: buy to open plus sell to open, sell to close plus buy to close, and the two unchanged handoff combinations
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