Size versus open interest
The single most useful comparison on a print is between two numbers that sit side by side on its detail sheet: the size of the trade and the open interest of the contract. When the first is larger than the second, the trade cannot be what most options trades are. This guide explains why, and what to do with that.
What open interest is
Every options contract that exists has a buyer and a seller. Open interest counts the contracts outstanding in a given strike and expiry, and it changes only when positions are opened or closed. A trade between a new buyer and a new seller raises open interest by its size. A trade where an existing holder sells to an existing short who is covering lowers it. A trade where a new buyer takes over from an existing holder leaves it unchanged.
The figure on the detail sheet is the open interest at the start of the day, published by the exchanges after the previous close. Today's volume sits beside it and counts contracts traded so far in the session.
Why size above open interest is different
If a contract has two hundred contracts of open interest and a single trade prints for two thousand, at most two hundred of those contracts can be an existing position closing. The other eighteen hundred, at least, are new. Somebody opened a position ten times the size of everything that existed in that contract the night before.
That is the cleanest signal on the tape. Most large prints are ambiguous between opening and closing: a five thousand contract trade in a strike with twenty thousand open could be a fund unwinding a hedge it put on a month ago, which says nothing about what it expects next. A five thousand contract trade in a strike with three hundred open is new positioning, and new positioning is a statement about the future.
The app makes this comparison on every print. Size larger than open interest adds twenty points to the conviction score, size larger than half of open interest adds ten, and the Size over OI chip on the tape shows only prints where size exceeds open interest. The same rule is available in the screener builder under Quick rules.
Reading the ratio
Size relative to open interest is a spectrum, not a switch.
A trade of a few percent of open interest in a liquid contract is routine, whatever its absolute size. Index options carry open interest in the hundreds of thousands, and a two thousand contract print there is ordinary business.
A trade of a large fraction of open interest, say half, is notable. It may be closing, but if it is, it is a large holder changing their mind, which is itself worth knowing.
A trade above open interest is opening, by arithmetic. Combine it with execution: opened above the ask by sweep, it is urgent new positioning, and that is the profile of the prints that most often precede a move.
Confirming it the next day
There is a check the tape cannot do for you but the calendar can. Open interest is updated overnight. If a print was truly opening, the contract's open interest the next morning will have risen by roughly the size of the trade. If it was closing, open interest will have fallen. Open the ticker's page the next day and look at the contract's open interest again. It is the one piece of certainty the options market offers about yesterday's flow.
Where it misleads
Newly listed strikes and expiries start with zero open interest, so the first meaningful trade in a fresh weekly contract is always larger than open interest. That is technically new positioning and practically routine, especially on the Monday a new weekly expiry opens. Check the expiry: a print in a contract listed this week deserves less weight than the same print in a contract that has been trading for months.
Spreads are the other trap. A trader who opens a call spread buys one strike and sells another, and both legs print. Each may be larger than its own open interest. Read together they are a capped, hedged view, not two separate bets, and the second leg reverses the apparent sentiment of the first.
In practice
Start a session with the Size over OI chip on and the tape sorted by premium. What remains is the day's new positioning, ranked by the money behind it. Read execution on each print, check the expiry, look for a companion leg in a neighbouring strike, and then ask what the trade is for. It is a short list most days, and it is the list worth reading.
Put this to work in the Options Sentiment Screener web app. The same screen is in the iOS and Android apps.
Open the Flow tape