To The Moon

Opendoor Tumbles 9% After Climbing to Three-Year High

$Opendoor Technologies Inc(OPEN)$   shares closed 9.4% lower Monday after climbing to its highest intraday level in three years, mirroring heightened implied volatility for a stock that has surged more than 11X from its record low. 

Shares reversed their earlier gains that came after new home sales in July beat estimates. That rally presented opportunities for short sellers and attracted bearish positions in the stock options market.  

At 11:21:52 a.m. in New York Monday, an active seller got a $3.24 million premium for unloading call options that give their holders the right to sell 1.95 million Opendoor shares at $4 by the end of the week. That was the biggest block trade involving the stock posted today. 

The multi-leg transaction was posted at the exact time that an active seller sold $1.95 million in call options with a strike price of $5. Monday's share price slump pushed those calls out of the money, increasing the odds that the contract could expire worthless in four days. The price of those calls slumped 59% to close at 36 cents, making it cheaper for the seller to buy back the contract and turn a profit after selling them earlier at a higher price of $1 per share. 

Short sellers were piling onto Opendoor on speculation that the gains could fizzle. The stock's short volume rose by 55.93 million shares on Friday, the most among stocks tracked. Those shorts were equal to 10.5% of last Friday's volume, up from a ratio of 6.5% a day earlier. 

Earlier, the the stock jumped as much as 17% to $5.87 after the U.S. Census Bureau released data showing that sales of new single-family homes reached 652,000 in July. While that’s down 8.2% from a year ago, it surpassed the average 630,000 homes that economists were expecting, according to estimates compiled by Bloomberg. 

Better-than-expected home sales data added to a tailwind that was fueled by Federal Reserve Chair Jerome Powell last Friday, when he kept the door open for a rate cut next month. But that didn't last and the stock soon gave back those gains and turned lower. 

The stock was among the most-talked-about stocks in the Reddit subforum Wallstreetbets before the market opened Monday. Opendoor was also the third most-watched, behind $NVIDIA (NVDA.US)$, and $Tesla (TSLA.US)$.

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