OPEN September 19th Options Begin Trading

The article details two options strategies for Opendoor Technologies (OPEN) at its current $1.73 share price, leveraging its high implied volatility (236-270%) relative to its 100% trailing actual volatility. Investors can sell a $1.50 strike put for a 47-cent premium, potentially acquiring shares at a net $1.03 with a 178.70% annualized return if the put expires worthless (73% probability). Alternatively, a covered call strategy involves selling a $5.00 strike call for 23 cents, offering a 202.31% total return if shares are called away, or a 75.82% annualized yield if the call expires worthless (66% probability), providing income on existing holdings.

Analysis

The options market for Opendoor Technologies (OPEN) exhibits exceptionally high implied volatility, with the put and call contracts discussed showing levels of 236% and 270% respectively. This is substantially elevated compared to the stock's actual trailing twelve-month volatility of 100%, indicating that options are pricing in significant potential for future price swings. This spread presents specific opportunities for investors. Selling a cash-secured put at the $1.50 strike, which is 13% out-of-the-money, could either establish a position at an effective cost basis of $1.03 per share (a deep discount to the current $1.73 price) or generate a 178.70% annualized return on the cash commitment if the option expires worthless, an event with a 73% probability. For existing shareholders, a covered call strategy at the $5.00 strike, which is 189% out-of-the-money, offers a way to generate income; the 23-cent premium provides a 75.82% annualized yield boost if the option expires worthless, which has a 66% probability. While this strategy could lead to a 202.31% total return if the stock is called away, it caps any further upside.

Key Decisions for Investors

• For investors interested in acquiring shares, selling the $1.50 strike put offers a disciplined entry strategy with a potential cost basis of $1.03, or a high-yield return of 178.70% annualized if the shares are not assigned.
• Current OPEN shareholders can monetize the stock's elevated implied volatility by writing covered calls; the $5.00 strike call, for instance, generates an immediate premium that translates to a 75.82% annualized yield boost with a 66% probability of retaining the underlying shares.
• Investors should note the significant premium of implied volatility over historical volatility, which suggests that while selling options appears attractive, they must be prepared for the large price swings that the market is pricing into the stock.