OPEN INTEREST:1.The total number of options and/or futures contracts that are not closed or delivered on a particular day.

2. The number of buy market orders before the stock market opens A common misconception is that open interest is the same thing as volume of options and futures trades. This is not correct, as demonstrated in the following example:

A common misconception is that open interest is the same thing as volume of options and futures trades. This is not correct, as demonstrated in the following example:

On January 1, A buys an option, which leaves an open interest and also creates trading volume of 1. -On January 2, C and D create trading volume of 5 and there are also five more options left open. -On January 3, A takes an offsetting position, open interest is reduced by 1 and trading volume is 1. -On January 4, E simply replaces C and open interest does not change, trading volume increases by 5.

Open interest is a concept all option traders need to understand. Although it is always one of the data fields on most option quote displays - along with bid price, ask price, volume and implied volatility - many traders ignore open interest. But while it may be less important than the option's price, or even current volume, open interest provides useful information that should be considered when

entering an option position. First, let's look at exactly what open interest represents. Unlike stock trading, in which there is a fixed number of shares to be traded, option trading can involve the creation of a new option contract when a trade is placed. Open interest will tell you the total number of option contracts that are currently open - in other words, contracts that have been traded but not yet liquidated by either an offsetting trade or an exercise or assignment. For example, say we look at Microsoft and open interest tells us that there have been 81,700 options opened for the March 27.5 call option. You may be wondering if that number refers to options bought or sold. The answer is that you have no way to know for sure. When you buy or sell an option, the transaction needs to be entered as either an opening or a closing transaction. If you buy 10 of the Microsoft March 27.5 calls, you are buying the calls to "open". That purchase will add 10 to the open interest figure. If you wanted to get out of the position, you would sell those same options to "close" and open interest would then fall by 10. Open interest also gives you key information regarding the liquidity of an option. If there is no open interest for an option, there is no secondary market for that option. When options have large open interest, it means they have a large number of buyers and sellers, and an active secondary market will increase the odds of getting option orders filled at good prices. So, all other things being equal, the bigger the open interest, the easier it will be to trade that option at a reasonable spread between the bid and ask . It also refers to the total number of derivative contracts, like futures and options, that have not been settled in the immediately previous time period for a specific underlying security. A large open interest indicates more activity and liquidity for the contract

The open interest of a futures contract at a particular time is the total number of long positions outstanding (or, equivalently, the total number of short positions outstanding).

TRADING VOLUME: The trading volume during a certain period of time is the number of contracts traded during that period. The total quantity of futures contracts bought and sold during a trading day. The volume of trade numbers, reported as often as once an hour throughout the current trading day, are estimates. Final, actual figures are reported the following day. In the meantime, investors can use tick volume, or the number of changes in a contract's price, as a surrogate for trade volume, since prices tend to change more frequently with a higher volume of trade Volume tells investors about the market's liquidity. Higher volume means higher liquidity and better order execution. When investors feel hesitant about the direction of the stock market, futures trading volume tends to increase. Volume also tends to be higher near the market's opening and closing closing times, and on Mondays and Fridays. It tends to be lower at lunchtime and before a holiday.The measure how many trades take place for a security or on an exchange on a given trading day. A high trading volume is an indicator of a high level of interest in a security at its current price. It is an especially important tool in technical analysis, in which trading volume is used to determine the strength of a market indicator.

For example, a price rise on heavy trading volume indicates that that price rise is a true indicator, while a technical analyst likely would be more skeptical of the same rise on lighter trading volume. The method for determining trading volume is called volume counting. In the United States, the SEC determines the methodology of volume counting. Trading volume is often simply called volume

Trading volume is the quantity of stocks, bonds, futures contracts, options, or other investments that are bought sold in a specific period of time, normally a day. It's an indication of the interest that investors have in that particular security or product at its current price.

Ex:Trading volume is such an important indicator for you because it tells you how significant a price shift is. For example, let's say there are two stocks that are both worth

$10, and they both suddenly gain $4 in one day to become $14. If the volume of stock A was 1,000,000 shares whereas the volume of stock B was only 10,000 shares, there is a much bigger shift in stock A. As a result, you can definitely consider stock A to have had a much greater increase in investor confidence.