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How Open Interest Counts Long and Short Option Positions

Article Quant Q&A · Author: sparkle
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Summary

The document explains how open interest relates to long and short positions in options and other derivatives. Because each contract has both a long side and a short side, open interest can be counted from either side: the number of open longs equals the number of open shorts. Opening a position therefore does not make open interest a count of short positions alone.

The answer gives this accounting principle but does not describe how exchanges or data vendors collect and publish open interest, or assess the reliability of a particular data source. It also does not spell out how open interest changes when existing contracts are closed or when traders take opposite sides of a transaction. The discussion is conceptual and does not provide market data or evidence about the cited website.

Key ideas

  • Each open derivative contract has one long position and one short position.
  • Open interest counts the open contracts, so the long-side and short-side totals are equal.
  • Open interest is not a measure of short positions alone.
  • The document does not assess the reliability or update process of a particular data provider.

Tags

OptionsDerivatives pricing
Full text
# Open interest and short selling


# Open interest and short selling












Open interest of SPY: https://finance.yahoo.com/q/op?s=SPY+Options

If someone sell short a contract the open interest adds up or down? The open interest on yahoo finance is a reliable Information of how many contracts are really opened or they misses someone?

## Answer by Alex C (score 2)

https://quant.stackexchange.com/a/23027

Options are in zero net supply (like futures and other derivatives), so for evry long there is a short and for every short there is a long. The open interest is the sum of the longs which also equals the sum of the short positions.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.