Open interest is the number of outstanding contracts in a given market. It is used to gauge market activity, and it is considered a leading indicator because it is a measure of money flow. Open interest increases when new money enters the market, and it decreases when money leaves the market.
When open interest increases, it means that more money is flowing into the market, which typically leads to an increase in price. When open interest decreases, it means that money is leaving the market, which typically leads to a decrease in price.