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elcheapo
Veteran Advisor

volume and open interest question

This is something I should know, but i'm having a brain fart tonight.......I was looking at a wheat chart, and was playing

with all the settings....I noticed that the open interest and volume was up.........what is the impact ?  open interest is the

numbers of contracts out right ?  and volume are the number of traded contracts, right......now here is the question.....

wouldn't a high volume day equal either a day that things went up (more people buying), or lower (more people selling)....

i guess i'm getting my contracts and options twisted up.....if open interest goes up, would me more people buying.........

 

it used to be if volume was going up along with open interest.......that was a good sign !!!!

 

now do you know why they want to do a mri next week !

 

 

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2 Replies
timetippingpt
Honored Advisor

Re: volume and open interest question

In my view, volume is of little value, except on days that are reversals after a support/resistance level was broken.

Today, volume seems to be directly correlated to daily range. This is expected in a speculative driven world with unlimited positions and HFT computers front-running the orders. So, I just don't spend much time on volume.

 

OI though, and its components, COT data, is extremely valuable. Right now, OI in KCWheat is increasing. Importantly, it is increasing because commercials are adding to long hedge positions and speculators are adding to short spec positions. This condition can go on for a few months but it almost always resolves out to the upside. Just exactly the opposite tends to happen at highs. OI declines on the retest of an old high. Check out crude in 08, corn in 12, bonds this year, cattle, the examples are legendary.

 

The current market where this is happening in a HUGE way is the Dollar Index. I don't know why, but OI of the big money is down about 35% from the high and prices have rallied almost completely back to it, as TIME is expiring. This is about as easy as it gets, but again it can linger for a another 10 weeks or so.

 

Hopefully, this helps you, worth what you paid for it, elCHEAPooo,  🙂

 

Good luck on the testing, never fun, and always stressful.

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bkadds
Advisor

Re: volume and open interest question

Can someone explain commercials and speculators to the ignorant me? The commercials I have always thought of as Cargill, etc. with the speculators being the funds. Is this right? Just wanting to be sure. Thanks.
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