Open interest relative to price trend

There are 2 components to futures open interest data:
  • Non-expiring futures contracts (also known as perpetual swaps or perpetuals)
  • Expiring futures contracts
Open interest
Price trend
High and rising
Over-leveraged long positions, potential bearish reversal
Remains high
Falling from peak
Traders buying the dip on leverage, exposing themselves to a long squeeze
High and rising
Over-leveraged short positions, potential bullish reversal
Remains high
Rising from bottom
Traders shorting the spike on leverage, exposing themselves to a short squeeze
When open interest is falling, it indicates a reversal is taking place.
When open interest is low, it indicates that leverage levels are low (significant de-leveraging has taken place).
Open interest is positively correlated to volatility. Option prices, represented by implied volatility, is positively correlated with open interest.
Sources of open interest data are: