Normal and Abnormal Open Interest Patterns

Open interest is the total number of contracts (promises to deliver something) in a futures market.


Normal Open Interest Patterns

Below is open interest for South Africa's SAFEX. Notice that, once open interest reaches its ideal size in 2002, it remains virtually unchanged through 2009 (in a mature futures market, open interest should remain more or less unchanged, fluctuating only because of production changes).




Abnormal Open Interest Patterns

Open interest in US agricultural futures contrast starkly against SAFEX open interest.




Normal and Abnormal Open Interest Patterns

Notice how open interest has a very clear annual pattern between 1986 and 1994. This is because Heating oil is needed in winter and not in the summer, so legitimate hedgers sell more contracts going into winter months. Notice also how this pattern completely breaks down after 2003. Finally, notice how absurd open interest has grown by the second half of 2009.



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5 Responses to Normal and Abnormal Open Interest Patterns

  1. Anonymous says:

    Well.. Well...

    Gold finally closed at 1k or above...

    But a funny thing happened...

    Oil collapsed...

    Might mean that Gold asking price will drop next week below 1k...

  2. Anonymous says:

    Anonymous I hate your guts.

  3. Anonymous says:

    If the US has to raise rates to protect the falling dollar the market and oil will take a tumble.Pms remain a solid long term investment.Pm stocks remain a question but some risk is worth the upside.Its that time of year(s) and the times...they are a changing.

  4. Anonymous says:

    LOL

    The dollar almost makes a full point return, even before the Euro market opens.

    Gold going down below 1k for sure, and will be all week.

    LOL!

    LOL!

    LOL!

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