The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question – “Can open interest be negative?” The simple answer to this is no, open interest cannot be negative. Open interest for options trading purposes is always going to be a positive number if it’s not zero and the reason is because there can never be an imbalance of negative contracts in the market. Open interest is meant to judge how many open contracts are still left in the market. To use an overly-simplistic example, let’s say that a buyer comes in and a seller comes in and there’s no other liquidity in the market. They choose to enter into an option contract where one party buys and one party sells. This creates now, a new option contract in the market and open interest rises from zero to one. Now, let’s say later on, that same buyer and that same seller come back and choose to close their position. They reverse their trades and create more trading volume, but now, they have re