When you buy a futures contract, are you creating a new contract, or just getting an existing contract transfered to you?
It can be either one, depending on what the seller is doing (i.e. selling to open or selling to close). If the seller is selling to open then a new contract is created, if selling to close then no additional contract is created.
Thanks for the reply. Now, if it's not a new contract, do I know the original contract price?( I know it does not matter, jsut trying to figure out how it works)
No, you don't. The only price you do know is the price you bought it at, you don't know the price the seller paid for it and it doesn't matter at all. All you need to know is the price you buy and sell at.
no the only numbers you should be concerned with are: 1. what price you are willing to pay for that contract at that specific time. 2. the expiration date
FWIW..............If a new "long" trades with a new "short", open interest increases. If an open "long" trades with an open "short", open interest decreases. If a new position holder trades with an open position holder, open interest remains unchanged.
Great post. Open interest has been spinning in my head for a while. If there is a buyer for every seller (and visa-versa) what is open interest. I think the last post explained it.
Open interest is the number of the outstanding contracts. One can sign a new contract with another person ( open interest increases ), sell it to another person ( change of ownership, open interest remains unchanged ), or make the delivery ( open interest decreases ) .