Continuous Open Interest

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By upticks on Thursday, November 13, 2003 - 05:11 pm:

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By Anonymous on Thursday, November 13, 2003 - 05:11 pm:

Hi, anonymous, very funny. That's the best proof that, finding the right price is really important.


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By grifway on Thursday, February 20, 2003 - 12:10 am:

TEst message, new member

Anyone try to incorporate any of Bill ONeils CANSLIM work in trading systems. Can you create your own indicators from free data sites?

Thanks
grifway


By Clive Fox on Tuesday, March 6, 2001 - 05:59 am:

Thanks again Chuck, the thought behind all this is to try and get confirmation of price movements without using price.

I am a strong believer in we (read me) can get confused with too many indicators all using the same series of data interpreted in a slightly different way, that is bias.

Open interest being a another data series hopefully can give some more information which is hopefully valuable.

I have seen very little on this topic and cannot recall any indicators based/designed specifically for open interest. Of course standard trendlines, moving averages (with the gap taken out !!) etc could all be applied. That is why I thought an indicator similar to the OBV could be of value as it is a cumulatiive indicator and I thought by say deducting a displaced moving average from it would give a nice oscillator around a zero line which should be much easier to interpret.

I will look at your suggestion re total interest in the very near future ( I am currently not in my home environment and will be away for a week or so) and let you know.

Again thanks for the informative input it is really appreciated

Clive


By Chuck LeBeau on Monday, March 5, 2001 - 10:59 am:

Clive,

I understand what you are trying to do and the logic seems sound. I wonder if you could accomplish the same thing by tracking total open interest in a market. That way you wouldn't have to worry about adjusting and rolling contracts. It would also remove the obvious distortions caused by open interest switching from an expiring contract into a more distant contract.

As an alternative, I have found that monitoring the daily ranges can be very informative. The range contractions and expansions are a good indicator of the interest in a particular market. I have found that many changes in trend are accompanied by a noticeable expansion in the daily trading range.


By Clive Fox on Sunday, March 4, 2001 - 05:43 pm:

Chuck thanks for your thoughts.

I understand the minimal relationship of volume in futures however I thought that the an increase in open interest would indicate new buyers/sellers coming into the market as opposed to existing participants cancelling each other out on a particular trade. Similarly a decrease would indicate no new players and a decling base of traders. If this interpretation is correct then open interest to me seems a proxy for volume (in shares). Therefore I want to be able to construct some sort of indicator to test this idea. Hence the concept of "back adjusting" open interest. As I said in my original post an indicator similar to OBV I believe could have value but would need to get rid of the rollover "gaps"


By Chuck Le Beau on Sunday, March 4, 2001 - 11:50 am:

Clive,

For what it is worth I have never found any use for volume and open interest in futures markets other than as a preliminary screen to make sure a market has enough liquidity to trade. (I like to see a minumum daily volume of 5,000 contracts and 20,000 of open interest.)

In the futures markets there are never more buyers than sellers, etc. They must always be equal, either in numbers or in size. Each contract must have a buyer and a seller and if there are 10,000 contracts of open interest there are exactly 10,000 longs and 10,000 shorts.

In the futures markets I have found that price activity creates volume and not the reverse. Futures traders like to go where the action is and price movement attracts traders. The prices move and the volume follows. The price is the lead indicator of volume so watching volume doesn't seem to help much in forcasting.

I have however, found volume to be of some value in stock trading where there is not a long for every short, etc.

If you do get the information you asked for in your previous message, I hope you can do some research on this topic and perhaps share some of your results with us. Perhaps my conclusions as stated above are not valid.(Wouldn't be the first time that my long held beliefs were not confirmed by test results.)


By Clive Fox on Sunday, March 4, 2001 - 05:54 am:

How does one back adjust for open interest with regard to rollover from contract to contract. Is it possible/desirable to "close the gap" like in a continuous back adjusted contract or is there some other way to deal with it. I am thinking that this would allow a meaningful way to add more data for analysis, something like a OBV of open interest which you could run various indicators on etc. Any thoughts or discussion would be appreciated

Clive


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