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Coffee Report Focus 3: Open Interest

Updated: Nov 23, 2021

One of the reports that serious traders look at on a daily is the Open Interest reports. This report gives rapid insight into whether the previous day's price action was driven by expanding or contracting interest in the commodity.

We'll look at what that means on a practical level, and how we can use this to predict price action, but let's start with some context.

For Every Buyer, a Seller:

The Open Interest (OI) shows how many contacts are open for a given future. One of the fundamental features of futures contracts is that they are bilateral--for every buyer, there must be a seller. Whenever a trade is executed on the screen to buy a future, there is another person on the other side who has just agreed to sell it.

When neither party owned a contract before a trade is executed, then 1 lot of open interest is created. As more traders join the contract and open more positions of long and short futures, more open interest is created. This is rising or increasing open interest.