Open Interest vs. Volume
Two traders entering into a contract, one buying and the other
selling, create one contract of open interest and one contract
Offsetting trades decrease open interest but increase volume.
If the two traders above offset the contract with each other,
the volume goes to two contracts but the open interest drops
back down to zero contracts.
The volume on any given day can be larger or smaller than
the open interest.
The total volume over the life of the contract will exceed the
open interest at any one time.
The open interest can be for larger quantities of the
underlying asset than actually exists. For example, there
could be contracts outstanding for 500,000,000 bushels of
corn when the crop is expected to be only 200,000,000
A typical pattern of open interest is for the open interest to be
very low during the early life of the contract, to rise sharply
as the contract becomes the near contract (the next one to
expire), and to fall sharply just as the month of expiration