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I notice on Option feed boards they are able to detect "Open Positions". And it appears to me that they simply check if the size of the position > Open Interest (OI) and that's how they can tell it is an open position. Now 2 things with regards to this:

1- A new position's size can be less than the current OI and yet still be an open position. But they cannot detect this? hence many Open positions can be missed by using the above criteria.

2- Is there a way to be able to tell if a position is closed at all? So if a person sells his contracts, there was a buyer of those, hence the net OI would stay the same (unless the buyer was a market-maker/options-writer). However the Daily Volume would go up nevertheless.

Just trying to see if there is a better method to detect new open positions (better than the above criteria), and also if there is a way to tell positions being closed?

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Open Interest represents the number of contracts that exist on any given day. Each party to an option trade may be opening or closing the contract. There are 4 scenarios:

  • Buy to Open (BTO) and Sell To Open (STO)

Both parties are initiating a new position so Open Interest increases by one

  • Buy to Open (BTO) and Sell To Close (STC)

If a contract owner sells to a new trader, Open Interest does not change (an existing contract is changing hands)

  • Buy To Close (BTC) and Sell to Open (STO)

If someone short a contract buys from a new writer, Open Interest does not change (an existing contract is changing hands)

  • Buy To Close (BTC) and Sell to Close (STC)

Both parties are closing an existing position (one previous buyer and one previous seller) so Open Interest declines by one, either directly or through exercise.

I notice on Option feed boards they are able to detect "Open Positions". And it appears to me that they simply check if the size of the position > Open Interest (OI) and that's how they can tell it is an open position.

That's not necessarily true. If a trader was short 60 contracts and then bought 100 contracts, he'd be closing 60 and opening 40.

A new position's size can be less than the current OI and yet still be an open position. But they cannot detect this? hence many Open positions can be missed by using the above criteria.

Is there a way to be able to tell if a position is closed at all? So if a person sells his contracts, there was a buyer of those, hence the net OI would stay the same (unless the buyer was a market-maker/options-writer). However the Daily Volume would go up nevertheless.

If Open Interest was available intraday with every trade then one could determine if trade were opening or closing positions. But it's an EOD stat so one cannot tell the objective of each trade (opening or closing).

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  • So even the paid Option streaming sites would not show real-time OI being changed with each trade? ....
    – Steve237
    Nov 1 '20 at 4:21
  • 1
    Open Interest is a day to day statistic. Nov 1 '20 at 12:00

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