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For a particular option, if Open interest has a positive value but volume is 0, does it give any clues to the investor?

There are open contracts in that option for the underlying but how come the market makers are not making a market so that trades can happen? Is it not the job of the market maker to facilitate a market? If there is no open interest, then I understand if volume is 0, because nobody is interested in buying/selling contracts in that particular underlying.

But how come there is a big open interest without volume, how to explain that? I am referring to SPY may 184 callsenter image description here

  • To answer your first question, yes, volume of zero clues me into looking at the bid-ask spread. I prefer to trade a .01-.05 wide spread to prevent 'slippage' or the loss of profit due to a wide spread. – emican Jun 4 '14 at 3:05
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Open interest is a poorly named term and is not the same thing as unfilled resting orders in the marketplace. Rather than referring to people "interested" in trading the instrument, it actually means people who already have a vested "interest" in that instrument -- because they already own it.

Specifically, open interest reflects the number of contracts that have already been bought but have not yet been "closed out" -- i.e. either sold or exercised. See the Investopedia page for a brief example.

In your question, then, the 4869 number means those are the number of existing contracts at that strike price. Perhaps everyone holding those contracts is planning on exercising them and that's why there was no volume on the date in question.

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The volume is simply the number of contracts that have traded on a given trading day. If the volume is zero, then none of those contracts have traded yet on that particular day. So by 9:50 a.m. ET, none of these options have traded. I'm curios where you got your data and if it is delayed. If it is delayed by 20 minutes, then you're basically seeing the data right at the open.

The market makers are making the market as you can see from the 4.11/4.25 bid/ask. So if you want to buy some contracts, they will sell it to you for 4.25. And if you want to sell some contracts, then they will buy it from you for 4.11. There job is to facilitate trades not initiate them.

Hope that helps!

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