what in tarnation is open interest?

What in tarnation is open interest?

Your favorite ag radio personality, says open interest this, open interest that. The grain merchandiser says, open interest blah, blah. Your favorite twitter follow, goes off about open interest. Your broker calls, and spouts OI up and OI down. All the while, your thinking, don’t use fancy words with me, smart alec.

This tweet caught my attention recently.Karen Braun @kannbwxOpen interest in CBOT #corn and #soybeans has surged in the new year, reaching a record 3.92M contracts as of Jan. 12. Old record was 3.84M on June 19, 2018. January 19th 202121 Retweets73 Likes

John Murphy defines open interest as:

Open Interest: the number of options or futures contracts that are still unliquidated at the end of a trading day. A rise or fall in open interest shows that money is flowing into or out of futures contract or option, respectively. In futures markets, rising open interest is considered good for the current trend. Open interest also measures liquidity.

More insight from Murphy…

  1. Rising open interest in an uptrend is bullish
  2. Declining open interest in an uptrend is bearish.
  3. Rising open interest in a downtrend is bearish.
  4. Declining open interest in a downtrend is bullish.
Hardcover Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications (New York Institute of Finance) Book

Don’t get over focused on one indicator of a market, like open interest. Market indicators like reading market structures (previous posts) signals what the market is doing now, or has done. It should not be used as a predictor of price. All market participants have to form a bias if they have skin in the game. Use this open interest understanding to understand the market right now. Its a signal that money is entering a market or leaving it.

Backyard (SESD)

Local corn

 basis flat to stronger. Ethanol margins improving with ethanol spot spike. Rail bids firmer. Market structure flat to more inverted. Corn is moving in the pipeline. Flat price is backed off but still attractive to farmers.

Local soybeans 

basis is flat to better. Mostly lead by improvement in rail bids. Nearby market structure is steady with flat to inverted spreads holding steady from previous week. Flat price still has a $13 handle which seems to be still attractive to farmers with unpriced soybeans.

Have a great week all.



This newsletter expresses the views of the author as of the date indicated and such views are subject to change without notice. The author has no duty or obligation to update the information contained herein. The newsletter is being made available for educational purposes only and should not be used for any other purpose.
Copyright © 2020 Cullen J. Wilson. All Rights Reserved. Information provided is general in nature and is provided without guarantee as to results. The information is not intended to be, and should not be construed as, trading, financial, insurance, legal, or tax advice. The author, its subsidiaries, and affiliates disclaim any liability arising out of your use of, or reliance on, the information.
Your situation is fact dependent and you should seek appropriate advice.
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