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What is open interest?

Open interest (also known as open contracts or open commitments) refers to the total
number outstanding of derivative contracts that have not been settled (offset by delivery).
For each buyer of a futures contract there must be a seller.
What is open interest in the futures and options segment?
Open interest is the total number of outstanding futures and options (F&O ) contracts at any point in
time. In other words, these are open or yet to be settled contracts. For instance, if trader X buys 2
futures contract from trader Y(who is the seller), then open interest rises by 2.
If another trader A buys 2 futures contracts from trader B, then the open interest rises to 4. Now, if
trader X unwinds his position and the counter party is either Y or B, then the open interest in the
system will reduce by that quantity.
But if X unwinds his position, and the counter party is a new entrant, say C, then the open interest will
remain unchanged. This is because while X has squared off his position, C's position is still open. The
level of outstanding positions in the derivatives segment is one of the parameters widely tracked by
the market.

what is swap option


A swaption is an option granting its owner the right but not the obligation to enter into an
underlying swap. Although options can be traded on a variety of swaps, the term
"swaption" typically refers to options on interest rate swaps.

writer of option

Option Contract is a type of Derivatives Contract which gives the buyer/holder


of the contract the right (but not the obligation) to buy/sell the underlying asset
at a predetermined price within or at end of a specified period. The
buyer/holder of the option purchases the right from the seller/writer for a
consideration which is called the premium. The seller/writer of an option is
obligated to settle the option as per the terms of the contract when the
buyer/holder exercises his right. The underlying asset could include securities,
an index of prices of securities etc.

Option Writer

The person who sells an option in return for a premium and is obligated to
perform when the holder exercises his right under the option contract. Also
referred to as the writer or granter.

Covered Call
A call option may be defined as a contract that gives its holder a right, but not an
obligation, to buy an underlying stock at a pre-determined price called the strike
price.
A covered call is a type of call option in which the trader writes off (sells) an
option against a stock that is currently owned by him. If the call writer does not own
the underlying stock, writing a call option with a simultaneous purchase of the
underlying stock is also considered as covered call writing.
A naked call is the other type of call option in which the trader writes off (sells) an
option against a stock that is not currently owned by him.

A covered call position owns underlying shares, and sells call options against the underlying
shares. If the calls are exercised, the underlying shares are delivered to the owner of the call
option, and the covered call writer receives an amount equal to the strike price multiplied by
the number of calls exercised. If the calls are not exercised, then a covered call strategy keeps
the premium received for selling the calls, in addition to continuing to own the underlying
shares.

Option delta which is the change in the option value when the stock price
changes by 1. It is also the numenr of shares that one must buy to replicate the
option. Since teh delta changes as one moves along the binomial tree, the
replication portfolio also changes . Dynamic replication or dynamic delta hedging
is the process of continuously adjusting the replicating portfolio as the stock
price changes.