Chartered Market Technician (CMT) Practice Exam 2025 – Your All-in-One Guide to Exam Success!

Open interest in the futures market refers to the total number of outstanding contracts that are currently held by market participants at the end of a trading day. It counts contracts that have not been settled or closed, providing insight into the flow of futures trading activity.

When open interest rises, it indicates that new money is flowing into the market, as more positions are being opened. Conversely, when it falls, it suggests that positions are being closed and that there may be a reduction in trading activity or interest. This metric is crucial for traders as it helps gauge the level of market participation and liquidity.

The other options do not accurately capture the essence of open interest. The total value of all futures contracts would require a valuation of each contract, while cash held in margin accounts pertains to the collateral required for trading rather than the number of contracts. Net profit from open contracts is concerned with the financial outcome of the trades rather than their quantity. Thus, the definition focusing on the number of outstanding contracts aligns precisely with the concept of open interest.