Question

In: Finance

Calculate Open Interest at the end and explain each step A long 50 B short 50...

Calculate Open Interest at the end and explain each step

A long 50 B short 50
B long 20 C short 20
B long 20 A short 20
A long 20 C short 20
C long 20 D short 20

Solutions

Expert Solution

Solution:

Stage 1) A is long 50 and B is short 50.

It means that the Open Interest (OI) will change by +50.

Long Short OI
A: 50 B: 50 50

Stage 2) B long 20 and C short 20

It means that B is reducing its short position by 20 and C is going long by 20. There will be no change in the open interest as overall A is long by 50 and B is short by 30 and C is short by 20.

Long Short OI
A: 50 B: 30, C: 20 50

Stage 3) B long 20 A short 20

B and A are reducing their position by 20 by going long and short respectively. OI will reduce by 20

Long Short OI
A: 30 (50-20) B: 10(30-20), C: 20 30 (50-20)

Stage 4) A long 20 C short 20

A and C are increasing their position by 20 by going long and short respectively. OI will increase by 20

Long Short OI
A: 50(30+20) B: 10, C: 40(20+20) 50(30+20)

Stage 5) C long 20 D short 20

C is decreasing its short position by 20 and D is increasing its short position by 20. There will be no change in the OI.

Long Short OI
A: 50 B: 10, C: 20(40-20) , D:20 50

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