What positioning data actually shows you.

Open interest (OI) is the total number of outstanding futures or options contracts for a given strike and expiry that haven't yet been closed, exercised, or expired. Every new contract created when a buyer and seller both open a new position adds one to open interest; every contract closed when both sides exit reduces it by one.

This makes OI fundamentally different from volume, which counts total contracts traded during a session regardless of whether those trades opened new positions or closed existing ones. A contract can trade heavily on a given day (high volume) while open interest barely changes, if most of that volume was traders closing positions against each other rather than opening fresh ones.

OI is published per strike and expiry in the options chain, and is one of the main inputs traders use to judge where meaningful positioning — and therefore potential support, resistance, or unwinding pressure — actually sits.

Volume resets to zero at the start of each session and counts every trade executed that day. Open interest carries forward from the previous session and only changes based on net new contracts opened or closed — it's a running total, not a daily count.

High volume with rising OI suggests new money is entering the market and the move has fresh conviction behind it. High volume with falling OI suggests existing positions are being unwound — the move may be participants exiting rather than new participants establishing a directional view.

Neither number alone tells the full story — they're read together, alongside price direction, to judge whether a move is being built by new positioning or unwound by existing positioning.

Combining the direction of price with the direction of open interest gives four standard readings. Long buildup: price rising with OI rising — new long positions are being added, read as bullish with fresh conviction behind it.

Short buildup: price falling with OI rising — new short positions are being added, read as bearish with fresh conviction. Short covering: price rising with OI falling — existing short positions are being bought back to close, pushing price up without necessarily reflecting new bullish conviction.

Long unwinding: price falling with OI falling — existing long positions are being sold off to close, pushing price down as longs exit rather than new shorts being initiated. Distinguishing these four matters because a rally driven by short covering can reverse quickly once the covering is done, unlike a rally driven by genuine long buildup.

PCR is calculated as total put open interest divided by total call open interest (or put volume divided by call volume, depending on which version is quoted), across all strikes for a given expiry. A PCR of 1.2 means put OI is 20% higher than call OI for that expiry.

PCR is read as a sentiment gauge: a high PCR suggests more hedging or bearish positioning via puts relative to calls, while a low PCR suggests more bullish call positioning. It's most commonly used as a contrarian indicator rather than a directional confirmation tool.

Because PCR aggregates across all strikes, it reflects broad positioning rather than pinpointing where exactly that positioning sits — for that, traders look at OI concentration at specific strikes rather than the single aggregate ratio.

PCR is typically read relative to its own recent range rather than against a fixed universal threshold, since "normal" levels vary by index and by market regime. An unusually high PCR (heavy put buildup) is often read as excessive bearish positioning or hedging, which can precede a bounce if that positioning starts unwinding.

Conversely, an unusually low PCR (heavy call buildup relative to puts) is often read as excessive bullish positioning, which can precede a pullback if calls start getting unwound.

This contrarian reading rests on the idea that extreme one-sided positioning leaves the market vulnerable to a squeeze in the opposite direction — but PCR extremes can also persist through a strong trend for longer than expected, which is why it's used as one input alongside price action and OI buildup patterns, not as a standalone signal.

Max pain is the strike price at which the total value of all outstanding options — both calls and puts — would be lowest at expiry, meaning option writers as a group would lose the least (and option buyers as a group would gain the least) if the underlying settled exactly there.

The theory behind max pain is that because option writers are typically better capitalized and more numerous in aggregate open interest, price has some tendency to gravitate toward the max pain level as expiry approaches, though this is a loose statistical tendency rather than a reliable rule.

Max pain is recalculated continuously as OI shifts through the expiry cycle, and tends to be treated as one reference point among several rather than a prediction to trade on its own — it says nothing about news, broader trend, or price action leading into expiry.