Is A Break Above $25 Next For Opendoor? An Option Analysis

Another strong earnings beat came Wednesday after the market close with Opendoor Technologies Inc OPEN posting a 9-cent-per-share loss vs. a Street estimate of a 17-cent-per-share loss. This was on top of a revenue beat clocking in at $2.26 billion vs. the $2.01-billion estimate.

Traders bought the earnings beat, as in the first 15 minutes after the report, the stock rallied over 23% and has been consolidating at the highs since. This Thursday the stock has traded over 31 million shares vs the 10-day average of 22 million shares, and yet the stock has made marginal highs while still below the earnings spike.

Why It Matters: With the strong volume of shares traded, the stock should be making new highs. Even the options volumes on the day are strong, with over 211,000 options traded, of which 172,000 of them are calls and 39,000 puts, meaning eight out of every 10 options are calls (image below).

Before Thursday, the total options out in the stock was 1,091,000, of which 755,000 were calls and 336,000 puts. Thursday's option activity alone added 20% to the total, making this a strong day for option traders.

And yet the stock is almost 10% off the earnings spike highs.

What's Next: Of the 211,000 options traded Thursday, about 63,000 of them are expiring Friday (30%). And of the prior 1,091,000 options, 35% of them are rolling off Friday as well. There seems to be a lot of hedging interest between the $22-$24 range, as the largest open interest sits at the $22.5 strike for this Friday's expiry, with the $25 and $27 strikes not far behind.

But considering those premiums are ultra low on those calls (10 cents on the ask), these seem more like punters vs. material interest.

If the stock fails to regain the earnings spike highs around $24.40, option traders long calls heading into tomorrow might take profits, reducing some of the bullish fuel in the markets. Looking at the four-hour chart below, you can see the earnings spike failed to reach the November highs of $25.32, possibly hinting there isn't enough option fuel to push the stock higher. 

However, if pullbacks toward $20 get bought up aggressively, bullish traders will aim to take out the November monthly highs, gunning for the $27 and $30 strikes, which have strong open volume for the Nov. 19 monthly expiry.