Building A Strategy with Open Interest
As always, happy Friday! This week I was asked by a Build Alpha user if he could build strategies using a contract’s open interest. Open interest is just the total number of outstanding contracts that are held by market participants at the end of each day. So it is intuitive that as more contracts are opened or closed then it might be telling of how traders are positioning. This is a detailed and advanced post. Build Alpha is all point and click, but this is certainly a way more advanced blog post showing how a more sophisticated user can utilize the software. I have to admit this is not something I have looked at previously so I was quite intrigued but I pulled some open interest data from TradeStation and saved it. I then went on to create columns I – M below. Columns I-L are momentum measures (N period change) of Open Interest. For example, column J holds the Open Interest change over the past 5 days. Column K holds the Open Interest change over the p...