Open interest is the total number of futures contracts held by market participants at the end of the trading day. It is used as an indicator to determine market sentiment and the strength behind price trends.
Open interest is calculated by adding all the contracts from opened trades and subtracting the contracts when a trade is closed.
Open interest and volume are related concepts, one key difference is that volume counts all contracts that have been traded, while open interest is the total of contracts that remain open in the market.
Open interest is one variable many futures traders use in their analysis of the markets used in conjunction with other analyses to support trade decisions. Large changes in open interest can indicate when certain participants are entering or leaving the market and may give clues to market direction.