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Finance GlossaryOpen Interest
Open Interest
Definition of Open Interest
Open Interest is created when a new seller and a new buyer enter into a fresh contract. It represents the total number of active futures or options contracts that are still open and not squared off on an exchange like the NSE. Open Interest helps traders understand market participation, liquidity, and sentiment in stocks or indices such as the Nifty. Rising Open Interest with rising prices indicates bullish strength, while rising Open Interest with falling prices signals bearish sentiment.
Related Terms
Cash Contract
A cash contract is an agreement between two parties in which the delivery of goods is involved at a predetermined price and date. Typically, bulk buyers like big companies enter into cash contracts on the spot price of a commodity.
These companies aren’t in the business of speculation. As a result, the delivery of goods is always involved in cash contracts, unlike futures where the contract can be settled with cash without taking delivery.
These companies aren’t in the business of speculation. As a result, the delivery of goods is always involved in cash contracts, unlike futures where the contract can be settled with cash without taking delivery.
Information Ratio
Information Ratio (IR) compares the returns generated by an asset adjusted for risk compared to a benchmark. IR helps you identify the level of consistency with which a fund or fund manager performs over time. This can help you compare fund managers who follow a similar investment strategy.
Liabilities
Liabilities are debt that a company owes to individuals or financial institutions in the form of bonds, debentures, salary, tax, and others.Liabilities play an important role in the balance sheet of a company as it signals competence to existing and prospective stakeholders.
Irredeemable Debentures
Irredeemable debentures are debt instruments that can not be sold unless the company is sold or shuts up shop. Those who hold irredeemable debentures will be paid an interest as long as the company operates its business.
Book Building
Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.
Book building is typically done by an underwriter (like an investment bank) who will invite institutional investors like hedge funds, mutual funds, and others to submit bids for the financial instrument.
These bids act as a range that the underwriter can use to fix a price that satisfies the company issuing the security and market participants.
Book building is typically done by an underwriter (like an investment bank) who will invite institutional investors like hedge funds, mutual funds, and others to submit bids for the financial instrument.
These bids act as a range that the underwriter can use to fix a price that satisfies the company issuing the security and market participants.
Narrow Market
A narrow market describes a situation where only a few stocks or sectors influence market movement, while the majority of stocks have low trading volume. It has few active participants on either the buy or sell side of the market. This limited participation suggests that the market trend is not broadly supported across the entire market.
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