Chapter 04 · Section 4.1
Call Open Interest/Volume
Suppose that on the first day there were only three trades:
Day 1 Al buys 5 Sep 35 calls. Sam sells 2 Sep 35 calls. Tim sells 3 Sep 35 calls.What are the call open interest and trading volume at the end of the first trading day?CALL PUT Open interest : Open interest : Trading volume: Trading volume:
a) 10 & 5
b) 50
c) 0
d) 35
e) 10
f) 5 & 5
5 Sep 35 calls means 5 call option contracts maturing in September with a strike price of $35.
Trading volume is defined as the total number of option contracts traded during a trading session. How many call option contracts have been traded during the first day?
Al buys 2 call option contracts from Sam and 3 from Tim.
... so 5 call option contracts have been traded.
Open interest is the number of outstanding contracts in a given market. Outstanding means not yet offset.
All of the 5 Sep 35 call option contracts traded were initiated, none have been liquidated yet.
Each opening transaction adds to the open interest and each closing transaction decreases the open interest.