Long, short and open interest

Summary

Open interest is the total number of futures contracts still open. Rising open interest with a rising price means new money is joining the move. A sharp fall in open interest during a fast drop often means many positions were liquidated at once. Together with funding, open interest helps show how crowded and how fragile a move is.

Key points

• Open interest counts the contracts still open.
• A sudden drop in open interest during a crash often means mass liquidations.
• Read it together with funding and price.

Check yourself

Open interest drops sharply during a fast fall in price. What does that often mean?

Practice