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Equity Index Futures · FUT-16 · Core

Open interest versus volume

What changes when a contract changes hands?

One concept per page · original written lesson · 317 prose words · authored, not installed or production-approved

What you will learn and prerequisites

Read first: What is an equity index future?

Open interest counts outstanding contracts after positions are netted. Volume counts completed trades during a period. A contract can trade many times without creating a new outstanding contract on every transaction.

Keeping these measures separate prevents overstating new positioning.

Understand the mechanism

If both parties open, OI rises by one. If both close, it falls by one. If one opens while the other closes, the position changes hands without necessarily changing OI. Every transaction adds volume.

OI also has a reporting time and does not identify a universal dealer direction: every contract has a long and a short.

Walk through the process

Compare matching periods and contract months. During a roll, OI can decline in one month and rise in another without a comparable change in aggregate exposure.

Describe what the data support instead of treating a higher unsigned count as inherently bullish or bearish.

Operational boundary

All figures are fictional teaching inputs, not current quotes or margin schedules. Product rules, broker requirements and usable liquidity remain separate from the model example. A planned exit and an algebraic hedge are not execution guarantees.

A worked example

Start with fictional OI 1,000. One hundred new/new trades raise it to 1,100. Fifty close/close trades reduce it to 1,050. Two hundred opening/closing transfers leave it at 1,050.

Volume across the sequence is 350 while OI changes only +50. The graph tracks outstanding contracts after each stage.

Open interest versus volume—worked comparison

Vertical: Open interest (contracts)
Horizontal: Opening/closing/transfer stage

Open interest versus volume—worked comparisonFictional data from the written example. The chart organizes the comparison; its shape is not a forecast. The complete numerical data are available below.9911,014.61,038.21,061.81,085.41,10900.61.21.82.43
1. Fictional example
Fictional data from the written example. The chart organizes the comparison; its shape is not a forecast.
Read the graph as a data table
Complete graph data; original fictional observations or model calculations
Opening/closing/transfer stageFictional example
01,000
11,100
21,050
31,050

What would invalidate the reading?

Counting all volume as new OI overstates position creation. Inferring dealer sign from the total is a second unsupported step.

Check your understanding

Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.

What are final OI and volume?

Reveal the worked answer

OI 1,050; volume 350.

Creation and destruction affect OI, while every trade contributes volume.

Critical risk question

What is the critical failure to avoid?

Reveal the worked answer

Counting all volume as new OI overstates position creation. Inferring dealer sign from the total is a second unsupported step.

Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome.

Takeaway

Return to the question: What changes when a contract changes hands? State the observed facts, the assumptions and the failure condition separately.

Sources, assumptions and downloadable script

External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.

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