Opendoor Technologies Inc. (NASDAQ:OPEN) experienced a sharp reversal on Friday, falling 6.6% to $4.95 by mid-morning, after briefly touching $5.495 earlier in the session. The decline largely wiped out the 10.7% surge from the previous day, leaving the stock just 3.3% above its Wednesday close. The volatility appears linked to the expiration of weekly options contracts, which saw concentrated activity at the $5 and $5.50 strike prices.
On Thursday, traders executed 70,991 Opendoor call options, roughly three times the normal volume. Nearly 23,800 of those contracts were tied to the July 10 weekly calls at $5 and $5.50 strikes. The put-to-call ratio dropped to 0.15, indicating heavy bullish sentiment. Implied volatility jumped to 97.72%. As options near expiration, market makers often adjust their hedges, buying or selling shares to manage risk, which can amplify price swings. The public data does not reveal the holders of these contracts, so it remains unclear whether dealer hedging was the primary driver of Thursday's rally or Friday's pullback.
Trading volume on Thursday reached 112.2 million shares, more than double the average and representing 11.6% of the company's outstanding shares. This volume was about 73% of the 153.7 million shares sold short as of June 15. Short covering could have contributed to the rally, but the data does not confirm actual covering activity. The price action appeared isolated to Opendoor, as peers like Offerpad Solutions Inc. (NYSE:OPAD) and Zillow Group Inc. (NASDAQ:Z) showed more modest moves.
The broader housing market provided mixed signals. U.S. existing-home sales fell 2.4% in June to an annualized rate of 4.09 million units, missing the 4.20 million forecast in a Reuters poll. The median home price reached a new record of $440,600. Lawrence Yun, chief economist at the National Association of Realtors, noted that monthly swings highlight how sensitive buyers are to affordability. Meanwhile, the average 30-year mortgage rate edged up to 6.49% from 6.43% the prior week. However, forward-looking data offered some optimism: Redfin reported that pending home sales rose 1.3% week-over-week to a six-week high for the period ending July 5. Mortgage rates, however, climbed to 6.68% as of July 8. Chen Zhao, head of economics research at Redfin, described the housing market as showing "a bit of resilience" heading into summer.
Opendoor's recent performance and outlook add context to the stock's movements. In the first quarter, the company reported revenue of $720 million, down 2% sequentially, but gross margin improved to 10.0% from 7.7%, and contribution margin rose to 4.4% from 1.0%. Homes purchased surged 45% to 2,474, while inventory grew 19% to 3,420 homes, with real-estate inventory valued at $1.139 billion. Adjusted EBITDA improved to -$31 million from -$43 million in the prior quarter. CEO Kaz Nejatian highlighted "better acquisitions, faster turns, stronger margins" in May. For the second quarter, Opendoor expects revenue to rise about 25% sequentially, with contribution margin in the middle of its 5%-to-7% target range and adjusted EBITDA near break-even.
Despite these positive signals, risks remain. If mortgage rates stay near 6.5% and home sales continue to decline, Opendoor may need to lower resale prices to move its growing inventory, potentially squeezing margins. Conversely, if margins hold steady and buying activity picks up, the high short interest could fuel another sharp rally. For now, Friday's reversal suggests that options positioning, rather than housing data, is the primary driver of the stock's near-term direction.
