Open interest (OI) is the count of derivative contracts currently open — positions created and not yet closed. Where volume measures activity, OI measures commitment that persists after the session ends.
OI rises only when a new buyer trades with a new seller (both open positions). It falls when an existing long trades with an existing short (both close). Volume can be enormous while OI barely moves — that is churn, positions passing hands rather than being created.
Reading the change in OI against the change in price yields the standard four-way table: price up + OI up (longs building), price up + OI down (shorts covering), price down + OI up (shorts building), price down + OI down (longs unwinding). These labels describe what happened in positioning terms — they are descriptions, not predictions.
OI cannot distinguish hedges from directional bets, and a single contract counts one long and one short — "OI buildup" is symmetric by construction; the labels above are inferences from the accompanying price move. OI is most useful as context layered on price, volume and order flow, not as a standalone signal.
Volume counts contracts traded during the session; OI counts contracts still open at any moment. High volume with flat OI means positions changed hands without new commitment.
A rise in OI alongside a directional price move, conventionally labelled long buildup (price up) or short buildup (price down) — descriptive shorthand for how the move was accompanied by new positions.
Not by itself. High OI means many open positions exist — how they resolve depends on future flow, not on the count alone.