Open Interest
Open interest is simply the number of outstanding futures (or options) contracts for a particular commodity. In the futures markets, when one trader buys a futures contract, another trader necessarily sells one contract. In this so-called “zero sum game,” for every winner, there is a loser. When the stock market crashed in 1987, many traders who bought stock index futures were bankrupted. However, these traders had to have bought their positions from somebody, and those sellers collectively made a fortune. Only when a buyer later sells his position to someone who had sold short does open interest decline.
Because it takes one bull and one bear to complete a trade and increase open interest, it follows that there is a conflict of ...
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