Open Interest vs Trading Volume in Options trading- Very important

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Open Interest

If a buyer and seller come together and initiate a new position of one contract, then open interest will increase by one contract. Should a buyer and seller both exit a one contract position on a trade, then open interest decreases by one contract. However, if a buyer or seller passes off their current position to a new buyer or seller, then open interest remains unchanged.

Open interest is just the contracts that are created(buy of 1 lot and sell of 1 lot will give 1 Open interest) are created. If an options contract exists, it must have had a buyer and also for every buyer, there must be a seller since you cannot buy something that is not available for sale.

Open Interest vs Trading Volume

Open interest is often confused with trading volume, but the two terms refer to different measures. Say for example when one trader who already holds 10 option contracts sells those 10 contracts to a new trader entering the market, the transfer of contracts does not create any change in the open interest figures as explained above for that particular option. No new option contracts have been added to the market because one trader is transferring their position to another.

Important to note that the sale of the 10 option contracts by an existing option holder to an new option buyer does increase the trading volume figure for the day by 10 but not Open interest as no new contract is created

What it means in a single sentence?

Change of contract from one person to another is only counted in Trading volume till the contract is actually exited completely.

Summary of what it means

So in essence, Open interest increasing with Change in Open interest on positive side then it saying is money flowing in at that position where there are Sellers who are ready to sell new contracts which are bought. Since you can not buy sometime unless someone sells, simple….