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Technology Stocks : USRX
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To: Milan Shah who wrote (15299)3/14/1997 2:11:00 PM
From: David Lawrence   of 18024
 
Suppose I have 100 shares of USRX. I want to write 1 call contract for April 60s. So,I call my broker and ask him to write up this new contract. Clearly, the open interest goes up by 1 contract. I hope I am correct on this.

Nope - at least I don't think so. If there is another writer of a contract who wants to exit, you might simply take over their position and they will pay you the premium, i.e. buy back their obligation. In that secnario, no change in open interest.

The OCC balances the orders, but existing positions wanting to exit are used first, then new open contracts are created.

... does open interest indicate the number of contracts available for sale, or does it indicate the total number of contracts outstanding?

Outstanding contracts.
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