Option Volume vs Open Interest: Flow vs Open Contracts

Option volume is the number of contracts traded during a session; open interest is the number of contracts still open afterwards. Volume is a flow, counted fresh each day; open interest is a stock of positions that carries over from day to day. A contract that changes hands ten times adds ten to volume but can leave open interest unchanged.

Option Volume Vs Open Interest

Volume: every contract that trades today, whether the trade opens a position, closes one, or both. It resets to zero each session.
Open interest (OI): contracts that have been opened and not yet closed, exercised, assigned or expired. It persists until positions are closed or the contract expires.

Volume measures activity. Open interest measures how many positions exist.

How A Trade Changes Open Interest

Every option trade has a buyer and a seller, and each side is either opening or closing a position:

Buyer	Seller	Change in open interest
Opening	Opening	+1 per contract
Opening	Closing	0 (the position passes to a new holder)
Closing	Opening	0
Closing	Closing	−1 per contract

Exercise, assignment and expiration also remove contracts from open interest.

Illustrative example: open interest in one contract is 500 at the start of the day. During the day 300 contracts trade: 200 between two opening parties, 60 where one side opens and the other closes, and 40 between two closing parties. Volume is 300; open interest next morning is 500 + 200 − 40 = 660.

How Open Interest Updates Overnight

Exchanges count volume as trades happen. Open interest is calculated by the options clearing process from the day's opening and closing trades and published before the next session. So the open interest shown during a session normally reflects positions at the previous close.

Why Volume Can Exceed Open Interest

Volume above open interest has ordinary causes:

Today's new positions are not in today's open interest. If OI was 100 at the start of the day and 1,000 contracts were opened today, volume is 1,000 against a start-of-day OI of 100.
Day trading: contracts opened and closed in the same session add to volume twice and to open interest not at all.
Repeated trading: the same positions can pass between holders many times in a day.
Same-day expiries: contracts expiring today can trade many times their overnight open interest, because positions opened and closed during their last session never enter it.

Volume above open interest is consistent with new positions being opened, but it does not show which side opened them or why.

How Vyreon Measures Them

Volume: total option contracts traded per session, compared with the average of the previous 21 sessions and with the security's own 126- and 252-session history.
Turnover: today's volume divided by start-of-day open interest.
Contracts trading above their open interest: contracts expiring after today whose volume exceeded their start-of-day open interest, with at least 100 contracts traded, reported in aggregate. Same-day expiries are excluded.
Open interest: the reported figure as of the previous close, with its one-session change split into contracts open on both days, expired and newly listed, so the expiry calendar does not masquerade as positioning.

See open interest and unusual options activity.

What Volume And Open Interest Do Not Tell You

Who traded, which side initiated, or whether a position is a hedge, part of a spread, or directional.
Whether rising open interest is bullish or bearish. It counts contracts, not intent.
Intraday positioning. Open interest is a once-a-day number.

Sources

The Options Clearing Corporation (OCC), Characteristics and Risks of Standardized Options, the options disclosure document: opening and closing transactions, exercise, assignment and clearing.
John C. Hull, Options, Futures, and Other Derivatives (Pearson, many editions): trading volume and open interest.