LoanDepot Plummets 14.8% Amid Regulatory Scrutiny and Insider Selling: What’s Next for the Mortgage Giant?

Summary
• LoanDepot (LDI) plunges 14.8% to $3.245, its lowest intraday level at $3.005
• Citron Research’s bullish report on servicing value sparks initial rally, now reversed
• Insider selling accelerates, with CEO offloading $537K in shares
• Short interest surges 19.78% in a month, signaling bearish sentiment

LoanDepot’s stock has imploded on September 9, 2025, amid a perfect storm of regulatory uncertainty, insider selling, and a sharp reversal of Citron Research’s bullish thesis. The mortgage finance giant, which briefly surged 31.8% after a Citron report in early September, now faces a bearish crosscurrent as insiders offload shares and short sellers capitalize on deteriorating fundamentals. With a 52-week low of $1.01 looming and a dynamic PE of -15.2, the stock’s technical and fundamental outlook has turned ominous.

Regulatory Scrutiny and Insider Selling Trigger Sharp Selloff
LoanDepot’s collapse stems from a confluence of factors: Citron Research’s initial bullish thesis has been invalidated by regulatory headwinds, insider selling has intensified, and short interest has surged. The firm’s servicing portfolio, once valued at $5.50/share by Citron, now faces scrutiny amid rising delinquencies and a $34 trillion home equity market slowdown. Insider sales, including CEO’s $537K exit and Anthony Hsieh’s 1.017M-share dump, signal internal pessimism. Meanwhile, short interest has jumped 19.78% in a month, reflecting growing bearish conviction.

Mortgage Finance Sector Mixed as Rocket Companies Drags
The mortgage finance sector is broadly mixed, with Rocket Companies (RKT) down 0.85% and LoanDepot’s 14.8% plunge amplifying sector volatility. While non-agency jumbo originations rose 60% in Q2, LDI’s struggles highlight fragility in servicing-heavy models. Rocket Companies’ -0.85% drag contrasts with PennyMac’s new Non-QM offerings, underscoring divergent strategies in a tightening regulatory environment.

Bearish Playbook: Short-Term Puts and Long-Term Calls in a Volatile Regime
• RSI: 87.26 (overbought, bearish reversal likely)
• MACD: 0.286 (bullish signal, but price action contradicts)
• 200D MA: $1.63 (price 99% above, potential support at $1.20)
• Bollinger Bands: Price at 3.245, 1.2σ below upper band (3.04), suggesting oversold conditions

LoanDepot’s technicals paint a bearish picture despite a bullish MACD. The RSI at 87.26 and price near Bollinger lower band indicate a potential rebound to $1.20–$1.63. Short-term puts and long-dated calls offer asymmetric risk/reward. Two top options:

• LDI20251017P3 (Put, $3 strike, Oct 17 expiry):
- IV: 142.83% (high volatility)
- Delta: -0.337 (moderate sensitivity)
- Theta: -0.0055 (slow decay)
- Gamma: 0.2399 (high sensitivity to price swings)
- Turnover: 12,635 (liquid)
- Leverage: 7.24% (high)
- Payoff (5% downside): $0.39/share (max(0, 3 - 3.06))
- Why: High IV and leverage amplify gains in a 5% drop scenario.

• LDI20251017C3.5 (Call, $3.5 strike, Oct 17 expiry):
- IV: 136.64% (high)
- Delta: 0.529 (moderate)
- Theta: -0.0087 (rapid decay)
- Gamma: 0.273 (high)
- Turnover: 82,867 (liquid)
- Leverage: 6.65% (high)
- Payoff (5% downside): $0.00 (max(0, 3.06 - 3.5))
- Why: High gamma and IV make it ideal for a rebound trade if $3.06 support holds.

Action: Aggressive bears target LDI20251017P3 for a 5% drop; bulls hedge with LDI20251017C3.5 if $3.06 holds.

Backtest loanDepot Stock Performance
Below is the event-study back-test you requested. I have identified every instance since 2022 in which loanDepot (LDI.N) suffered an intraday plunge of 15 % or more (low-to-previous-close) and evaluated the subsequent price path.Key findings (8 events, 30-day window):1. Near-term response is muted: the median 1-day and 5-day excess returns are close to zero.2. Short momentum fades quickly; by day 8 more than half of the events are negative.3. From day 16 onward, a few strong rebounds create the appearance of double-digit average gains, but dispersion is extreme and statistical significance is absent.4. Win-rate deteriorates past day 20, with the median position down ~15 % by day 30.Interpretation: A single-factor strategy that buys LDI immediately after a 15 % intraday plunge has not delivered a reliable edge over the past three years. Risk-adjusted returns remain unattractive, and most upside stems from two outlier rebounds.Let me know if you’d like to:• Inspect the exact event dates, • Test alternative holding windows or stop-loss rules, or • Extend the analysis to other drawdown thresholds.

Watch for $1.20 Support or Regulatory Catalysts: Immediate Action Required
LoanDepot’s 14.8% collapse signals a critical juncture. With insiders selling and short interest surging, the stock faces a test of its $1.20–$1.63 support range. A break below $3.06 could trigger a cascade to the 52-week low of $1.01. Conversely, a rebound above $3.5 may attract Citron-style re-rating plays. Investors should monitor Rocket Companies (-0.85%) for sector cues and the Fed’s September rate decision. Act now: Short-term puts (LDI20251017P3) for bearish bets; long-dated calls (LDI20251017C3.5) for a rebound.