Volume and open interest are two data points that you'll deal with on a regular basis as an options trader. For the purposes of this quick write up we will be dealing with volume and open interest as they pertain to options contracts. &nbsp;&nbsp;<h2>Volume</h2>Volume is straightforward and can be defined as:<blockquote>The number of contracts that have been transacted during any given session.</blockquote>&nbsp;<h4>Used in a sentence:</h4>'Today the $ABC 100 strike calls expiring this week saw 10,000 volume.' &nbsp;Any kind of transaction counts towards volume, which can only increase. That is to say whether you are buying to open (BTO*), selling to open (STO*), buying to close (BTC*), or selling to close (STC*), all of these actions count towards volume.*: BTO/STO/BTC/STC is another concept that you must know inside and out. Reference <a href="https://unusualwhales.com/glossary/4-types-of-orders">this glossary entry</a>.&nbsp;&nbsp;<h3>Example: &nbsp;</h3><ul><li>Jack buys to open 100 contracts (volume is now 100).</li><li>Jill sells to open another 100 contracts (volume is now 200 [100+100]).</li><li>Joe, who already owned 50 contracts, sells to close his position (volume is now 250 [100+100+50]).</li></ul>&nbsp;<h2>Open Interest</h2>Open interest is where things start to get tricky. Let's define open interest as:<blockquote>The number of existing contracts for any given option.</blockquote><h4>Used in a sentence:</h4>'There is 5,000 open interest on the $ABC 100 strike calls.'The definition is literal:It doesn't matter if the contracts were longed (BTO) or shorted (STO): any kind of existing contract counts towards open interest. Due to this fact a call contract with high open interest isn't necessarily bullish nor is a put contract with high open interest bearish.&nbsp;There's another wrinkle... As previously stated the definition is literal: 'it is the number of existing contracts for any given option.'This leaves room for the potential for a trader to start a new position or close an existing position and see neither an increase nor decrease in open interest.&nbsp;<h3>Example:</h3><ul><li>The $ABC 100 strike call has 0 open interest on Monday morning.</li><li>During Monday's session I buy to open 5 of the $ABC 100c. No other activity takes place.</li><li>On Tuesday morning the open interest on these contracts is 5.</li><li>During Tuesday's session I decide that I want to close my entire position. I set a sell order that isn't filled.</li><li>You decide that you want to start an $ABC 100 strike call position. You put in a buy order for 5 contracts which happens to meet the price of my open sell order.</li><li>I have now closed my 5 calls and you have now bought 5 calls.</li><li>On Wednesday morning the open interest on these contracts would remain at 5.</li></ul>&nbsp;Does that make sense? Here are some real world examples in which large amounts of contracts were closed without a similar decrease in open interest the next sessions:<ul><li><a href="https://www.youtube.com/watch?v=C5rX4XO6xfg">Breakdown on Youtube</a></li><li><a href="https://x.com/snorlax_uw/status/1657007718719422464">X/Twitter - DIS 8000 size trade</a></li><li><a href="https://x.com/snorlax_uw/status/1758146002001760632">X/Twitter - META 5000 size trade</a></li></ul>Hopefully these examples resonate!&nbsp;<h2>How Volume and OI Interact with each other</h2>A few basic analogies I've put together to try and describe how volume and open interest interact with each other:<ul><li><a href="https://x.com/snorlax_uw/status/1669777149979492352">X/Twitter - Scooter Analogy</a></li><li><a href="https://x.com/snorlax_uw/status/1648016816696877056">X/Twitter - 1 contract example</a></li><li><a href="https://x.com/snorlax_uw/status/1648405611225161729">X/Twitter - 1x1x1 blocks analogy</a></li></ul><h2>Related Articles</h2><ul><li><a href="https://unusualwhales.com/information/breaking-down-an-option-contract-chart">Breaking Down an Option Contract Chart</a></li><li><a href="https://unusualwhales.com/information/how-to-read-an-option-contract">How to Read an Option Contract</a></li></ul>

Interactions between Volume and Open Interest 

This article offers a full explanation of one of the most important aspects of trading and tracking options: the relationship between Volume and Open interest.

The Discord options_screener Command Step-by-Step and How To Spot Institutional Option Trades With It

How to Plot the 0DTE Straddle Breakeven Prices on Your Periscope Chart and Why You Should Care

Earnings Date Differences Explained: Gaining Confidence in Your Unusual Whales Data

Delta Airlines $DAL Unusual Options Activity Lookback

What is the ETF Overview?

How to Fix 404 Errors when Using AI Tools with the Unusual Whales API

Theoretical Value

Book Value

Market Capitalization (Market Cap)

Mutual Fund

Par Value

Volatility Index (VIX)

Price-to-Earnings Ratio

Yield Curve

Value Stock

Treasury Note (T-Note)

Treasury Bond (T-Bond)

Treasury Bill (T-Bill)

Stock Split

Short Selling

Short Interest

Risk Tolerance

Revenue

Recession

Synthetic Short

Synthetic Long

Synthetic Position

Over-the-Counter (OTC) Market

Money Market Fund (MMF)

Stop Order

Market Order

Limit Order

Interest Rate Risk

Periscope FAQ

How To Interpret Periscope Net Gamma Exposure

Quick Custom Alert Presets

Institutional Investor

Retail Investor

IPO (Initial Public Offering)

Hedge Fund

Growth Stock

Futures Contract

Fundamental Analysis

Technical Analysis

Float

Short Squeeze

Flow Review February 12, 2025: Unusual Activity on $KWEB and a Follow Up Trade

Flow Review June 15, 2024: How we used Unusual Whales to know when Roaring Kitty exited his GameStop, $GME calls

Flow Review June 5, 2024: A Breakdown of Roaring Kitty's GameStop $GME options activity, and how we tracked it

Flow Review January 30, 2025: Identifying Put Writes with $AMZN and tracking Unusual Options Activity in $CLS

Flow Review September 4, 2024: Super Micro Computer, $SMCI, and its unusual trading days before major news event

Flow Review September 11, 2024: PLTR and DELL join the S&P500, a look back at their options activity beforehand

Flow Review September 2024: Unusual Shorting Flow and how to Spot PUT Writing with $CRWD

Flow Review November 2024: Trading around Crypto stock $CLSK around Trump's Election

Flow Review November 2024: Unusual Options Activity around Microsoft $MSFT and $AI news

Probability of Profit (POP)

Flow Review $COF August, 2024: Following a $COF trader using Historical Flow

Flow Review $SMCI, October 2024: Walking through SMCI Unusual Flow

Flow Review $TIGR, $PDD, $BABA October 2024: Breaking down Unusual Options Flow in Chinese Stocks, and how Options helped push the Chinese stock market frenzy