Price Forecast:

Bullish Case: Eagle Point Credit (ECC) may rebound as high-yield CLOs perform stronger due to improved economic indicators and increased capital deployment, signaling potential upside. Historical returns suggest a likelihood of profit over 1-2 years based on past trends.

Bearish Case: Concerns over macroeconomic instability may lead to continued yield compression in CLOs, negatively impacting NAV and resulting in further declines in ECC price. Investors may remain cautious amid broader market volatility.

Potential Outcomes:

• 1. 30% chance: Increased capital deployment boosts returns (+30%).
• 2. 20% chance: Macro downturn affects CLO distributions (-20%).
• 3. 50% chance: Stable performance with minor fluctuations (flat returns).

Trading Oracle: Implement a bullish debit spread targeting a 3-6 month timeframe on ECC, with calls slightly above $9.00. Anticipate volatility increases while managing risk effectively for high reward-to-risk scenarios. Consider taking profits if price recovers significantly, leveraging positive return patterns seen in historical data.

December 21, 2024