Open interest is the number of options contracts that have been opened and not yet closed out. Each option contract has an open interest figure, which is updated once a day. In addition, both buyers and sellers can affect open interest in a contract. For example, if I take a position in XYZ June 10 covered call (purchasing 500 shares of XYZ and selling 5 XYZ June 10 calls to open a new position) open interest in the June 10 calls will increase by 5. When I close that position (sell shares and buy back calls) open interest will decrease by 5. The exercise of options will also reduce open interest. Open interest can give you a sense of the liquidity of an options contract. When there is a lot of open interest, the contract is likely to be actively traded and very liquid.