Why Open Interest Is a Major Factor in Option Selections
Why Open Interest Is a Major Factor in Option Selections
If you're writing covered calls in Canada, open interest (OI) should be one of your top metrics when screening trades. It can make the difference between a smooth, profitable trade and a frustrating one with poor fills or slippage.
What Is Open Interest?
Open interest is the total number of outstanding option contracts that have not been closed or exercised. It represents trader participation and liquidity.
- High OI = active trading, good liquidity
- Low OI = low demand, poor execution risk
Why It Matters
- Better liquidity: Higher OI means it’s easier to enter and exit positions without slippage.
- Tighter bid-ask spreads: You keep more of the premium when spreads are narrow.
- Reliable price signals: Popular options reflect consensus — helping validate your thesis.
How Optrader.ca Helps
Optrader.ca lets you filter options by open interest. You can set a minimum OI (e.g., 100) to automatically exclude illiquid trades — and focus on options with real volume and tighter pricing.
