Volume starts every session with a clean slate at zero and increases throughout the day.
Options Trading: Understanding Option Prices
Open interest, however, is a rolling tally of the total number of option contracts open and active at each strike, representing all options that have not been closed or exercised. The number does not change throughout the day but rather adjusts overnight once trades are tallied, exited positions are closed, and new positions are added.
That day, Trader A buys to open 10 contracts at this strike and Trader B sells to close 30 contracts at this same strike. Open interest dropped by a net value of 20 contracts.
How to Read Option Quotes
One complexity with open interest is that it may not change at all or change only very slightly despite notable volume. While some chalk this up to day traders, what are option quotes are entering and exiting positions over the course of the same day, others point out it is likely caused by options changing hands from one trader to another.
For example, if Trader B had sold her options directly to a new market participant Trader Crather than selling them to close, open interest would have moved to 1, as the same option contracts remain on the books, just in different hands. So while B may have exited her position, C came in as a new buyer to buy these same positions, and Trader A still adds his 10 contracts.
What is an Option Chain? How Do You Read Option Quotes?
This can be a confusing process, but a trader whether beginning or advanced what are option quotes learn a lot by watching the daily volume and open interest patterns shift each day.
The only exceptions are if a security is delisted.
One easy way to find out whether an option is available is to look at the options chain, which is available through your broker or on the finance pages at Yahoo! The options chain provides a list of all the months and prices that are available for a given security.
That means you hold the options only from the trade open date until their expiration date and sometimes not even until then. Technically, options on stocks expire on the third Saturday of every month.
So if you own a July option, you have from between the day you purchased the option until the third Friday of July for it to become profitable. On a few occasions, the underlying stock or ETF trades after the market closes on Friday of expiration week, which can cause some action in your option.
During the time you own the options contract, you can exercise your right to sell the option, you can choose to buy the underlying stock at the agreed-upon price e.
Lastly you can choose to do nothing and the option will expire worthless without penalty to you.
Remember, because the market is closed on Saturday when the options technically expire, they actually stop trading the Friday before.