How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: hpeace who wrote (964)	3/14/1997 4:43:00 PM
From: Rodney Lockhart	of 14162

Steve, Per McMillan open interest is maintained by the exchange. Each opening transaction increases open interest, while each closing transaction decreases open interest. Open interest doesn't differentiate between buyers and sellers. Open interest is useful in determining the liquidity of the option in question. The larger the open interest the narrower the bid/ask spread and the easier it is to trade in large numbers of contracts. If you bought someone else 1000 contracts, then open interest would remain unchanged. You can't tell for sure what level of "inventory" a market maker might be carrying.

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