[Derivative Products ABC] Key Indicators in the Futures Market... What Are 'Contract Quantity' and 'Open Interest'?

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[Asia Economy Reporter Park Jihwan] Representative liquidity indicators in the futures market include 'contract volume' and 'contract value.' These are used in the same way as trading volume and trading value in the stock market. Along with these, the indicator unique to the futures market called 'open interest' is also widely used to understand the liquidity of the futures market.

According to the Korea Exchange on the 23rd, in the futures market, instead of trading volume used in the stock market, the term 'contract volume,' which refers to the number of contracts traded over a certain period, is used, and the unit is expressed in contracts. The contract value in the futures market is calculated by multiplying the contract price at which the trade was executed by the contract volume.

Open interest exists only in the futures market and refers to the number of contracts that remain open without being settled after taking a long or short position in futures. When new futures contracts increase, open interest rises, but when settlement contracts for existing positions increase, open interest decreases. A large number of unsettled open interest contracts means that there are more investors using futures for actual demand (hedging) rather than speculative traders seeking short-term price gains through futures.

Generally, in futures trading, there is a limit on the amount of open interest an investor can hold. This is to prevent the risk of investor default in advance and to prevent unfair trading practices such as price manipulation. Also, it aims to mitigate market shocks caused by the liquidation of large amounts of open interest.