Problem $2\mathrm{.}26$

Explain what is meant by open interest. Why does the open interest usually decline during the month

preceding the delivery month? On a particular day, there were $2,000$ trades in a particular futures

contract. This means that there were $2,000$ buyers $($going long$)$ and $2,000$ sellers $($going short$).$ Of the

$2,000$ buyers, $1,400$ were closing out positions and $600$ were entering into new positions. Of the $2,000$

sellers, $1,200$ were closing out positions and $800$ were entering into new positions. What is the impact of

the day's trading on open interest?