Series VIIIMediumIntroduction to Derivative Markets

Open Interest (OI) in a derivatives contract represents:

AThe total volume of contracts traded during the day
BThe total number of outstanding (not yet squared-off or settled) contracts at a point in timecheck_circle
CThe number of contracts that expired in-the-money
DThe interest rate charged on margin funding

Correct answer

B. The total number of outstanding (not yet squared-off or settled) contracts at a point in time

lightbulbDetailed Solution

Open Interest is the total number of derivative contracts that remain open (outstanding) — neither closed out, exercised, nor expired. Unlike volume (which counts all trades in a day), OI changes only when new positions are created or existing ones closed, and is used to gauge the flow of money into a contract.

Reference: NISM Series VIII Equity Derivatives, Chapter 1.

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