Imagine that you've just checked the option chain on a security. You're studying volume and open interest. You're ensuring that the security's options are liquid enough for your needs. You plan on trading a butterfly centered at that particular option's strike. You notice that 300 have already traded that morning and open interest is 27,775. Open interest refers to the number of options or futures contracts that remain open or undelivered that day.

You decide that the option is liquid enough for your needs. You enter a butterfly that includes selling 10 of those options you had been checking and buying 5 at each of the wings. The volume on the option that forms the body of the butterfly ticks up by 10 contracts, but you notice that the open interest doesn't change.

Imagine that another trader out there is watching volume in that particular option, trying to decide what other traders are doing. That trader who watched the volume tick up by 10 contracts wouldn't have been able to tell by comparing the volume and open interest alone whether you had bought-to-open or sold-to-close those 10 contracts. While volume is updated constantly, open interest is calculated only once a day, at the end of the day.

If that other trader had been watching the "last price" column, and volume had been changing slowly enough that she could catch the price at which the 10-contract transaction had occurred, she might have been able to guess whether those ten contracts had been sold or bought by comparing the price at which they traded to the bid and ask prices. A last price close to the bid probably meant that that those 10 contracts were being sold while a price close to the ask probably meant that they were being bought.