Options

Option Volume (Opt Vol, average daily option volume)

Option volume is the number of option contracts on an underlying traded during one session. Averaged over several days, it gives an indication of the activity and liquidity of the option chain.

Calculation and mechanics

Every execution of an option contract counts once towards the daily volume, whether it opens or closes a position. The volume is updated continuously during the trading day.

The average daily option volume smooths out individual days with unusually high or low activity. Higher volume often goes together with tighter bid-ask spreads and better fills. More direct liquidity characteristics, however, are the bid-ask spread, the available sizes and the market depth.

Distinction

Open interest measures the stock of open contracts, volume the turnover of one day. Both are indicators of the liquidity of an option chain but look at it from different angles: volume shows the current trading activity, open interest the stock of open contracts.

The put/call ratio by volume relates the traded put volume to the call volume.

Related terms

All terms in the glossary

All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.