Volume and Open Interest - How to Judge an Option's Liquidity
Reviewed by Leon Moyer - Published October 9, 2026 - Last reviewed October 9, 2026
In this lesson
Explain the difference between volume and open interest, work out how a day's trades change open interest, and judge whether a contract is liquid.
Volume is the number of option contracts that have traded so far today. Open interest is the number of contracts that are still open, bought and sold but not yet closed, exercised or expired. Volume resets to zero every morning; open interest carries over from one day to the next.
Both numbers sit beside every strike on the chain and show trading activity, but neither tells you what price you could get if you sell later. To assess current liquidity before you trade, also check the bid-ask spread and quoted size.
What is volume in options?
Volume counts every contract that changes hands during the session, whatever the reason. A trader opening a new position, a trader closing an old one, and a market maker taking the other side all add to it. If one trader buys 10 contracts from another, volume rises by 10.
On the XYZ chain from How to Read an Options Chain, the 50 call shows a volume of 1,460: that many contracts have traded today. The 53 put shows 12. Volume tells you how active a contract is right now.
What is open interest in options?
Open interest counts contracts, not people or sides. Every open contract has one buyer (long) and one seller (short), and that pair counts once.
Trades affect open interest according to both sides of the transaction:
- Both sides open new positions: open interest rises by the number of contracts.
- Both sides close existing positions: open interest falls by that number.
- One side opens and the other closes: the position just passes from one trader to another, and open interest does not change.
Exercise, assignment and expiration also remove contracts from open interest. OCC calculates open interest after end-of-day clearing; chains generally show the previous session's count during trading. Vendor update times vary. See OIC's explanation of open interest.
How trades change volume and open interest
Monday close
Open interest: 6,000
Tuesday: 900 traded, both sides opening
Volume 900. Open interest: 6,900
Wednesday: 500 traded, both sides closing
Volume 500. Open interest: 6,400
Worked example
Following open interest on the XYZ 50 call
The XYZ 50 call ends Monday with 6,000 contracts of open interest. Assume no exercise or expiration changes in this example.
- Tuesday: 900 contracts trade, and on every trade both sides are opening new positions. Tuesday's volume is 900, and open interest after the close is 6,000 + 900 = 6,900.
- Wednesday: 500 contracts trade, and on every trade both sides are closing. Wednesday's volume is 500, and open interest falls to 6,900 - 500 = 6,400.
- Thursday: the chain shows volume of 1,460 and open interest of 6,400. The 6,400 is Wednesday's closing count. Thursday's 1,460 contracts could be any mix of opening and closing trades; the answer shows up in Friday's open interest.
Real days are rarely all opening or all closing. If Thursday's trades had been half opening pairs and half trades where one side opened and the other closed, open interest would rise by only the opening pairs, 730 contracts.
Illustrative and hypothetical. The ticker and prices are invented for teaching, and the figures exclude commissions, fees, margin interest and taxes, which reduce real results. Past or hypothetical outcomes do not indicate future results.
Does open interest tell you if traders are bullish or bearish?
Not by itself. Because every contract has a buyer and a seller, a jump in call open interest could be new call buyers betting on a rise, or new call sellers collecting premium against shares they own. The number cannot tell the two apart.
Treat volume and open interest as measures of activity, not of direction. They tell you where traders are, not what they expect.
How do you judge an option's liquidity?
A liquid contract is one you can buy and sell quickly, in reasonable size, without giving up much to the spread. On the chain, look for three things together:
- A tight bid-ask spread relative to the mark. This is the most direct measure, alongside the quoted size available for your order. Bid, Ask and the Spread shows how to calculate it.
- Meaningful open interest. This measures outstanding contracts, not guaranteed buyers for your exit. The OIC calls equating volume and open interest with liquidity a common misconception.
- Volume today. This shows recent activity; even a contract with no trades today can have competitive market-maker quotes.
Compare two contracts on the same stock. The 35-day 50 call has volume of 1,460, open interest of 6,400 and a $0.10 spread on a $2.20 mark. The 63-day 55 call has not traded today, has open interest of 18 and a $0.40 spread on a $1.05 mark. Both are XYZ calls, but the second costs four times as much to cross and has fewer outstanding contracts. Neither count tells you how many distinct traders hold them.
A liquid contract and a thin one
Bid-ask spread, one contract
Premium at the mark, one contract
Liquidity usually concentrates in the same places: strikes near the stock price, the nearest expirations, and heavily traded stocks and ETFs. Far out-of-the-money strikes and distant expirations are often thin. That is not a reason to avoid them entirely, but it is a reason to check the spread first and to use limit orders.
Check your understanding
A contract starts the day with open interest of 2,000. During the day 300 contracts trade, all with both sides opening. What is the volume, and what will open interest be tomorrow?
Show answer
Volume is 300. Open interest will be 2,300, because every trade opened a new position on both sides.
A trader who owns 10 calls sells them to a trader who is opening a new long position. What happens to volume and open interest?
Show answer
Volume rises by 10. Open interest does not change, because the position only passed from one trader to another.
Which is usually the more direct measure of what liquidity costs you: open interest or the bid-ask spread?
Show answer
The bid-ask spread, because it is the amount you give up to get in and out. Open interest and volume help explain why a spread is tight or wide.
Key takeaways
- Volume counts contracts traded today and resets each morning. Open interest counts contracts still open and is usually updated after the close.
- Open interest rises when both sides open, falls when both sides close, and stays the same when a position passes from one trader to another.
- Neither number tells you whether traders are bullish or bearish; they measure activity, not direction.
- Judge liquidity by current spreads and quoted size; volume and open interest add context but do not guarantee an exit.
Common questions
What is open interest in options?
Open interest is the number of option contracts that are still open: bought and sold, but not yet closed, exercised, assigned or expired. It is usually updated once a day, after the close, so the figure you see during the day reflects the previous session.
Is high open interest good for options?
High open interest means many contracts remain open, not necessarily many distinct holders. It does not guarantee liquidity; check current bid-ask prices and quoted size. It does not tell you whether the stock will rise or fall.
What does it mean when volume is higher than open interest?
More contracts traded today than were open at the start of the day, which can include repeated trading of existing positions. Some of those trades may have opened new positions and others closed old ones, so the change only shows up in the next day's open interest.
Does open interest show if traders are bullish or bearish?
Not on its own. Every open contract has a buyer and a seller, so rising open interest in a call could mean new call buyers or new call sellers. The number counts contracts, not the direction of anyone's bet.