Open interest and volume

The chain's cells carry two numbers beyond the premium: volume and open interest. They read liquidity - can you trade this cell without a punishing spread - and they read activity, and one of their patterns is a rare piece of genuine options information.

The two measures

• Volume: contracts traded in the session - the flow through a cell, and a read on how liquid it is right now; low volume means a wide spread and hard fills, per lesson 2.
• Open interest: contracts currently outstanding - positions opened and not yet closed; it measures how much is committed to a cell, and grows when new positions open and shrinks when they close.
• Together: high volume on rising open interest is new positioning; high volume on falling open interest is positions closing - the same opening-versus-closing read the futures track used, on the option chain.

The read worth having

Unusual option volume relative to a cell's open interest is genuine information: a sudden surge of trading in a particular strike and expiry - especially far from the money - can signal that participants are positioning for a move, and because options require a directional and timing commitment, that positioning carries more information than undirected share volume. It is watched for exactly this reason. But the read is noisy and much abused: 'unusual options activity' is sold as a signal service (the pattern-selling industry, in options costume), and much apparent positioning is hedging, spreads, or market-maker flow with no directional view - so the honest read is careful and sceptical, per the platform's standing volume discipline.

The liquidity gate

Beyond information, open interest and volume are the liquidity gate: a cell with little of either is illiquid - wide spread, hard to enter and worse to exit - and trading it means accepting the spread cost of lesson 2 at its worst. The practical discipline reads both before trading any cell: enough volume and open interest to trade it cleanly, and an eye on unusual activity as a noisy, abused, occasionally genuine read on positioning. The chain's two activity numbers are its liquidity map and its one honest information source - read together, carefully, as the reading module's tools for navigating the grid.