Open interest in options trading is the total number of option contracts that are still open. This means that no options have yet been exercised, nor have any been closed out by an offsetting transaction. Open interest is also known as the count of how many option contracts exist for the specific combination of underlying stock, expiration, and strike price.
Open interest differs from an options volume in that the volume refers to the number of options that are traded during a given period of time. Therefore, an options volume will reflect the number of options that have changed hands from a seller to a buyer, regardless of whether the option is a new or existing contract.
As a call option investor, more open interest is better. The reason for this is that there is more liquidity for the call option that you are trading. More liquidity essentially means that there are smaller spreads between the bid price and the ask price. This is a positive for you, as it will be beneficial should you need to close out your options position prior to the expiration date of the option.
Unlike shares of stock where there are a fixed number of units, there is no fixed number of option contracts. This means that there could be zero, or there could be several thousand, as new contracts are created all the time. In fact, there is really no limit to how many option contracts can be created and sold, as long as there are buyers Adviser for them.
The important thing to remember as a call options trader is that you should stick to selling options that have an open interest of at least 1,000. Staying with this rule of thumb can keep you invested in options that are fairly liquid and that should have reasonably tight spreads.
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