When it comes to futures markets, high open interest can have a significant impact on market volatility. As contracts near expiration, traders may feel pressured to close, roll over, or adjust their positions. This rush of activity can lead to substantial price movements that may catch some market participants off guard.
Recently, research firm Kaiko highlighted the relationship between open interest and market volatility. While futures have been attracting strong interest from traders, the funding rates for these positions have remained below the highs seen in March. This suggests that while there is active trading in futures markets, the overall demand may be more subdued than previously thought.
It is important for traders to keep an eye on open interest levels in futures markets, as they can provide valuable insights into market sentiment and potential price movements. By understanding how high open interest can impact market dynamics, traders can better position themselves to navigate volatile market conditions.
