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NEW QUESTION: 1
In the context of futures contracts traded on an exchange, the term 'open interest' refers to:
A. The total number of outstanding contracts
B. The total number of contracts traded during the day
C. The total number of contracts expiring in the near month
D. The total number of long contracts net of the number of short contracts
Answer: A
Explanation:
Explanation
Open interest refers to the number of outstanding contracts, which is the same as the number of long positions or short positions held by market participants. Note that since for every long futures contract position held there is a seller who holds the short side, the open interest that is long is identical to the open interest that is short. (This is unlike the spot market where one could have long positions without anyone else needing to be symmetrically short).
The total number of contracts traded refers to traded volumes, and not open interest. Other choices are irrelevant in the context.
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