The futures market is a zero sum game. Total numbers of longs in the market are equal to the total number of shorts.
The total number of outstanding contracts (which have not been closed) long/short at any point of time is called ‘Open Interest’.
Open Interest is normally maximum in near month expiry contract.
OPEN POSITION
Open position in futures of a stock exchange member is calculated as follows :
Net position of proprietor + Gross position of client = Open position of broker.
Open positions for proprietor and clients are calculated separately.
For Proprietor: -
Buy Qty – Sell Qty = Open position.
If Buy Qty > Sell Qty, then open long position.
If Sell Qty > Buy Qty, then open short position.
For Clients: -
First, long and short positions for entire client pool are calculated separately.
Clients (Buy – Sell) = Clients long position.
Clients (Sell – Buy) = Clients short position.
Now member’s open position = Proprietary net position + Clients long position + Clients short
position.
