Opendoor $OPEN Bullish Options Bottom-feeder After Dark Pool Selling

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In late September 2022 through mid-October 2022, dark pool trades occurred in Opendoor $OPEN stock that look like institutional investor selling. However, on October 21, 2022, a deep-pocketed investor appears to be taking a long gambit on Opendoor $OPEN in the options market.

Opendoor will report Q3 2022 financial results on November 3, 2022, after the market close.

Dark Pool Trades in Opendoor $OPEN Stock

Dark pool trades occurred in Opendoor $OPEN stock on September 26, 2022, October 4, 2022, and October 13, 2022. The dark pool trading appears to be selling because the price of $OPEN stock fell following the prints hitting the tape.

Opendoor stock chart on October 23, 2022, with a line graph and dark pool trades shown in orange bars with a table on the right with the following text TIME SYMBOL MESSAGE PRICE 3.500.000 DARK BLOCK $9.4M 10/13/22 OPEN $2.71 19.67% AvgVol 2,0677,500 DARK BLOCK $7.2M 10/13/22 OPEN $2.71 15.05% AvgVol 3,735,000 DARK BLOCK $12.0M 10/04/22 OPEN $3.38 21.62% AvgVol 7,019,405 DARK BLOCK $21M 9/26/22 OPEN $3.06 39.46% AvgVol 9/26/22 OPEN Unusual Very Large Block $3.06

Make sure to review this lesson on dark pool trading so that you understand the chart above.

The dark pool selling appears to be from continuing weakness in the U.S. housing market. It also occurred a few weeks before a lawsuit from Pomerantz LLP alleging that the company failed to properly disclose the risk of its iBuying A.I. that purportedly enables Opendoor to make accurate market-based offers to sellers for their homes, and then flip those homes to buyers for a profit. The class-action lawsuit alleges that the A.I. used by the Company to make offers for homes could not accurately adjust to changing house prices across different market conditions and economic cycles and as a result, the Company was at an increased risk of sustaining significant and repeated losses because of residential real estate pricing fluctuations and thus the Defendants overstated the purported benefits and competitive advantages of the Algorithm.

Opendoor Technologies downgraded to Sell at Goldman Sachs

On October 17, 2022, Goldman Sachs analyst Michael Ng downgraded Opendoor Technologies to Sell with a price target of $2, down from $7. The analyst sees continued weakness in the U.S. housing market. Ng said that although Opendoor shares are down 82% year-to-date, ongoing housing weakness through 2023 should depress its earnings power. He believes declining home prices will lead iBuyers to increase service fees directly or indirectly to manage margins, resulting in reduced purchase volume.

Opendoor price target lowered to $3.25 at Keefe Bruyette

On October 6, 2022, Keefe Bruyette analyst Ryan Tomasello lowered the firm’s price target on Opendoor Technologies to $3.25 from $7.25 and kept a Market Perform rating on the shares. Tomasello recommends underweighting the shares into year-end. The near-term risk/reward skews to the downside given that KBW’s Q4 gross profit estimates are 52% below the Street. He thinks current consensus estimates are optimistic.

Did an institutional investor reduce long positions in $OPEN stock on the news that Opendoor was being investigated by several law firms? Could the dark pool trading be front-running of the Goldman Sachs downgrade or Keefe Bruyette’s lowered price target? Maybe. But what is really perplexing is the bullish option flow buyer in $OPEN stock on October 21, 2022.

Bullish Option Flow In Opendoor $OPEN Stock

Bullish option flow occurred in Opendoor $OPEN stock on October 21, 2022.

Opendoor stock option flow on October 21, 2022 with text that reads TIME SYMBOL EXP STRIKE C/P SPOT DETAILS TYPE VALUE 11:21 :46 OPEN 11l11/22 3 CALL 2.42 1000@0.13_A SWEEP $13K 11:20:14 OPEN 11/11/22 3 CALL 2.43 789@0.13_A SWEEP $10.3K 1 1:19:42 OPEN 11/11/22 3 CALL 2.43 1000@0.13_A SWEEP $13K 11:19:15 OPEN 11/11/22 3 CALL 2.43 866@0.13_A SWEEP $11.3K 11:18:06 OPEN 11/11/22 3 CALL 2.43 1133@0.12_A SWEEP $13.6K

Notice that all the call option trades are sweeps with a $3 strike that expires on November 11, 2022. Is a deep pocket options trader betting on a bounce or short-squeeze? Maybe. Could be a technical bounce. These call option trades seem highly risky, given the headwinds noted above. My guess is that these trades are part of a bigger picture option strategy that we aren’t privy to.

Chamath Palihapitiya unwinds two SPACs, cites high valuations and market volatility

Chamath Palihapitiya unwinds two SPACs, cites high valuations and market volatility

Opendoor Technologies $OPEN Stock Technical Analysis

Opendoor $OPEN stock is in a technical strong downtrend. Long-term indicators suggest a continuation of the downtrend. However, short-term indicators suggest the market is in highly oversold territory and that a bounce or trend reversal is possible. Could the anticipation of a technical bounce within the next couple of weeks be why a deep pocketed call options trader bought the $3 calls on October 21, 2022?

Opendoor Technologies stock chart on October 23, 2022, with a neutral MACD and negative money flow.
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