Open interest is a very good indicator of changing trends in the market that brings information regarding bearable or bullying market status. The high dynamic range of price values may act worse upon the investors. An open interest in the market will let these investors to understand the flow of the market and will give a chance to secure them if the market goes wrong. Hence, the open interest acts as a security for safeguarding the investments in the market. It gives the price range and the underlying assets of particular investment.
The Two: Bullish and Bearish
The open interest indicator indicates two major market situations, which is either Bullish or Bearish. When the market demand increases for a particular investment with an increased volume of trade and the open interest is also increased, then the market status is generally called as Bullish. If there is a decreased volume of trade and the open interest is also decreased then the market status is Bearish. The open interest works on thee basis of how many contracts have been closed out in the past and how many are in present and yet to come. It is a much generalized study of the market on a particular security. It gives easy yet beneficial information regarding the market.
If open interest in a market is getting increased, but the value of the underlying asset value is decreasing, then the market sentiment or market status is bearish. It is a situation in which the investors can feel free to have their investments in the same share without any fear of loss. But when both the open interest and the asset value of particular investment is decreasing, then the market sentiment is quiet complex and bullish. It is a situation that alarms the investors about the drastic changes that is going to occur in the market. By this way, the investor can safeguard his investment by either taking it away or transferring from one to another.
For example let us assume a company ‘A’ having its stock value increasing steadily and the open interest for the stock is also increasing consistently. The closing date of the stock is getting closed in a week or month time. Then the market sentiment is bullish. The investor will either have good profit or heavy loss sometimes depending on the stock value that ends up on the last few days of stock closing.
Similarly, assume a company ‘B’ having its stock value declining gradually and the open interest on its stock is also reducing. Then the market sentiment is bearish. The investor can either bear the loss he faces as it will be very less or he can even switch his investment to other particulars so that he may escape the loss. On the whole, the open interest is a very good indicator that says the market status right by providing information regarding any changes in the market status.
The Two: Bullish and Bearish
The open interest indicator indicates two major market situations, which is either Bullish or Bearish. When the market demand increases for a particular investment with an increased volume of trade and the open interest is also increased, then the market status is generally called as Bullish. If there is a decreased volume of trade and the open interest is also decreased then the market status is Bearish. The open interest works on thee basis of how many contracts have been closed out in the past and how many are in present and yet to come. It is a much generalized study of the market on a particular security. It gives easy yet beneficial information regarding the market.
If open interest in a market is getting increased, but the value of the underlying asset value is decreasing, then the market sentiment or market status is bearish. It is a situation in which the investors can feel free to have their investments in the same share without any fear of loss. But when both the open interest and the asset value of particular investment is decreasing, then the market sentiment is quiet complex and bullish. It is a situation that alarms the investors about the drastic changes that is going to occur in the market. By this way, the investor can safeguard his investment by either taking it away or transferring from one to another.
For example let us assume a company ‘A’ having its stock value increasing steadily and the open interest for the stock is also increasing consistently. The closing date of the stock is getting closed in a week or month time. Then the market sentiment is bullish. The investor will either have good profit or heavy loss sometimes depending on the stock value that ends up on the last few days of stock closing.
Similarly, assume a company ‘B’ having its stock value declining gradually and the open interest on its stock is also reducing. Then the market sentiment is bearish. The investor can either bear the loss he faces as it will be very less or he can even switch his investment to other particulars so that he may escape the loss. On the whole, the open interest is a very good indicator that says the market status right by providing information regarding any changes in the market status.