Skip to content
GetProfitable
Search
Dictionary

Volume / open interest ratio

Today's contract volume divided by yesterday's open interest; a rough screen for series where new positioning is unusually heavy.

A ratio near or below 1 is ordinary. A ratio of 5, 10 or 30 means the day's trading dwarfs everything already outstanding, which usually signals a deliberate new position rather than routine two-way flow.

It is a screen, not a signal. High ratios appear constantly in illiquid far-dated lines where open interest is tiny to begin with, and the trade you are excited about may be one leg of a hedge whose other legs you cannot see.

Example: the XYZ $55 call has 400 open interest and trades 12,000 contracts, a ratio of 30. Worth a look. The XYZ $80 call has 3 open interest and trades 60 contracts, a ratio of 20 — statistically identical, practically meaningless.

Related: option-volume, open-interest, unusual-options-activity, options-flow

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Payoff of a long call at expiryA flat loss equal to the premium below the strike, turning upward at 45 degrees above it.Profit / loss per share08595115125Strike 105Max loss 3 — the premium paidBreakeven 108Profit keeps growingUnderlying price at expiry
Buying a call: payoff at expiry. A 105-strike call bought for 3 loses that whole 3 if the price finishes at or below 105, breaks even at 108, then gains a dollar for every dollar higher. The loss is capped at the premium; the upside is not capped.

Educational only, not advice. Spotted an error? Post in Site Feedback.