Here’s the best explanation we have for why Opendoor suddenly crashed

Opendoor Technologies is having a session for the ages. The stock, which was up nearly 120% at its peak, was halted for volatility shortly after 3:00 p.m. ET after paring half of those gains in a matter of minutes. Shares were volatile after resuming trading and are up about 30% on the day as of 3:38 p.m. ET.

(First of all, it’s insane that a stock that was up more than 50% on the day and approximately a zillion percent in the trailing week was halted for downside volatility.)

Bearing in mind that nobody knows anything, least of all me, here’s a stab at what was going on that drove the halt in shares of Opendoor:

The five-minute stretch near 3 p.m. is the point in time when there has been the most motivated selling in Opendoor all day: approximately 42% of transacted volume took place on the bid side, per Bloomberg data. The bid is the highest price a buyer is willing to pay, the ask is the lowest price a seller is willing to accept (and is higher than the bid), so when we see activity on the bid, it points to motivated selling. In this case, it’s likely pointing to profit-taking on a name that’s run ridiculously hard, ridiculously fast.

It is no surprise to me that breaching $4.50 was what caused the stock’s losses to crescendo.

We’ve spent today talking about gamma squeezes and I specifically highlighted the $4.50 strike earlier as critical: there was zero open interest in the contract before today, and it is the most traded options contract by volume by far, trading more than double any other contract. This arguably makes it the most critical point for the stock.

Gamma is highest when an option is at the money: aiming to lock in profits on these exceptionally profitable wagers means the same dynamics that were pressing the stock higher in recent sessions conspired to make the reverse occur by creating a situation where a large amount of deltas (that is, the underlying stock!) would be unloaded.