Change in Open interests

What Does increase or decrease in open interest indicates also increase in OI means short or long
For eg increase in OI of PUT level what does it means.

Increase in Open Interest:

  • Generally indicates: New money entering the market. This suggests growing interest in the underlying asset and potentially strengthens the current trend (upward if prices are rising, downward if falling).
  • Specific interpretations:
    • Uptrend with rising open interest: New positions being opened, likely bullish.
    • Downtrend with rising open interest: Aggressive short-selling, suggesting the downtrend might continue.
    • High overall open interest: Increased liquidity and market attention.

Decrease in Open Interest:

  • Generally indicates: Money flowing out of the market. This can signal weakening momentum or a potential trend reversal.
  • Specific interpretations:
    • Uptrend with falling open interest: Short covering causing the price rise, bearish sign as money leaves.
    • Downtrend with falling open interest: Liquidation of long positions, reinforcing the downtrend.
    • Low overall open interest: Reduced liquidity and potentially less reliable signals.
  • Open interest alone doesn’t provide definitive signals. Consider it alongside price movement, trading volume, and other technical indicators for a more comprehensive picture.

Adding to what @Jayadratha said,

You can read more about OI from this Varsity chapter…

You can learn more about OI from this video by Sensibull

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