We recently compiled a list of the 10 Most Volatile Stocks Under $3 For Day Trading. In this article, we are going to take a look at where Opendoor Technologies Inc. (NASDAQ:OPEN) stands against the pump and dump stocks.
Day trading involves buying and selling stocks within a single trading day to capitalize on short-term price movements. Volatile stocks are often preferred for their frequent price swings, creating opportunities for quick profits. Equity beta, which measures the sensitivity of a stock’s return to market changes, is a key metric often used by investors for gauging volatility. Day traders close their positions by the end of the trading day to avoid the risks associated with holding overnight, such as unexpected market events, earnings announcements, or global developments that can drastically impact stock prices before the next trading session begins. While penny stocks, particularly those priced under $3.00 per share, are appealing due to their low entry cost and potential for rapid gains, they also carry heightened risks like low liquidity and susceptibility to manipulation. The key takeaway for readers is that these trades shall be approached with cautiousness and a clear strategy with risk management in place.
READ ALSO: 10 Best Stocks For Day Trading
Stocks under $3.00 offer a distinct advantage in that they typically operate below the radar of hedge funds, which prioritize larger, more liquid investments to accommodate their substantial capital and complex strategies. Hedge funds, the most informed and skilled investors, leverage extensive resources, market expertise, and advanced analytics to gain a competitive edge. Their absence in the penny stock space leaves more room for retail investors to seize opportunities without competing against institutional investors’ sophisticated tactics. This lack of institutional interest can create less efficient pricing, offering well-researched retail traders the potential to identify undervalued stocks and profit from short-term volatility via day trading.
Short-term trading strategies become more attractive during times of macroeconomic uncertainty, which can further fuel volatility and create opportunities for swing trading. The main volatility index in the US market still remains elevated vs. its moving average as investors have a hard time digesting the tariffs situation and the abrupt cuts in federal workforce and spending. Bond yields are reluctant to price in lower rates in the future – despite odds of an economic recession rising substantially if compared to the beginning of the year, the potentially accelerating inflation, as fueled by tariffs, will likely keep rates high. Regardless of what happens, it is clear that Trump 2.0 gives investors plenty of anxiety – many have been actively seeking cheaper investments abroad, particularly in Europe, which has caused the US stock market to relatively underperform the rest of the world.
Small-cap stocks are usually the most affected during periods of heightened volatility. The good news is that the Bull-Bear Ratio compiled by Investors Intelligence fell to 1.3 during the past week, which, from a contrarian perspective, is a bullish signal. This means that pockets of opportunity might soon return to the penny stocks category, both for long-term investors and day traders. Despite short-term fears and uncertainty, the fundamentals of the US stock market remain solid, with future earnings estimates staying strong and potentially seeing an uplift from tax cuts later this year or next. We suggest considering stocks with a high equity beta, above 2.0, as this category will likely outperform in a rising market.
A real estate broker presenting pieces of paper describing the details of a home sale.
Our Methodology
We used Finviz to filter companies with a share price under $3.00 and that have an equity beta above 2.0. Then we compared the list with Insider Monkey’s proprietary database of hedge funds’ holdings as of Q4 2024 and included in the article the top 10 stocks with the highest hedge fund ownership.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Opendoor Technologies Inc. (NASDAQ:OPEN)
Number of Hedge Fund Holders: 20
Opendoor Technologies Inc. (NASDAQ:OPEN) is a real estate technology company that operates an online platform for buying and selling residential properties. It uses data analytics and automation to provide instant home offers, streamline transactions, and reduce the complexities of traditional real estate processes. Sellers can receive cash offers and close quickly, while buyers access a marketplace of listed homes with digital touring and financing options. OPEN primarily generates revenue by purchasing homes, reselling them at a margin, and offering ancillary services such as financing and title insurance. The company operates in multiple US markets, targeting homeowners seeking speed and convenience in real estate transactions.
Opendoor Technologies Inc. (NASDAQ:OPEN) reported mixed results for Q4 2024 and the full year, with some improvements in financial performance despite ongoing challenges in the real estate market. The company exceeded its outlook for acquisitions, revenue, contribution margin, and adjusted EBITDA in Q4. Revenue for Q4 was $1.1 billion, up 25% YoY, while full-year revenue decreased to $5.2 billion from $6.9 billion in 2023. Contribution profit improved significantly, reaching $242 million for the full year compared to a loss of $258 million in 2023, with a contribution margin of 4.7%. Adjusted EBITDA loss narrowed to $142 million for the full year, a substantial improvement from the $627 million loss in 2023. The company ended the year with a strong balance sheet, including $1.1 billion in total capital and $6.9 billion in non-recourse asset-backed borrowing capacity.
Opendoor Technologies Inc. (NASDAQ:OPEN) is focusing on optimizing contribution profit dollars, exploring new revenue opportunities, and ensuring long-term value creation. The company is implementing strategies to enhance customer experience, improve pricing models, and align marketing efforts with seasonal patterns. Despite ongoing macro challenges in the real estate market, OPEN is expanding its offerings, including List with Opendoor and Marketplace, to serve more sellers and unlock new revenue opportunities. Management is committed to driving towards sustainable, profitable growth and expects to significantly reduce the adjusted net losses of the company in 2025. With an equity beta of 2.77, OPEN is one of the most volatile stocks under $3 for day trading.
Overall OPEN ranks 4th on our list of the most volatile stocks under $3 for day trading. While we acknowledge the potential of OPEN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than OPEN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.