RWT Forecast + Trading Strategies


Bullish Case: RWT's recent price increases and positive historical trends suggest a potential continuation of upward momentum, supported by flattening volatility. The company's strategic investments and strong 8% dividend yield enhance its attractiveness.


Bearish Case: Persistent long-term downtrend, high implied volatility, and mean-reverting price actions indicate continued market skepticism towards RWT. High debt-to-equity ratio and local financial challenges pose significant risks.


Potential Outcomes:

1. Continued short-term price recovery (30%).

2. Persisting downtrend due to negative sentiment (40%).

3. Volatility-driven price swings (20%).

4. Positive impact from strategic investments (10%). These probabilities are adjusted based on recent performance observations and market sentiment.


Trading Oracle: Deploy short-dated put credit spreads expiring around August 2024, capitalizing on mean-reverting price action and high short-term implied volatility. Focus on $7.00 strike prices for optimal risk-reward balance. This combines the strategy's alpha with protecting downside risks from volatility spikes.


July 17, 2024


Redwood Forecast

RWT      Redwood











Correlated Assets

Assets that tend to move strongly with RWT



VFC Forecast + Options Trading Strategies   VFC  VF (0.8)


LI Forecast + Options Trading Strategies   LI  Li Auto (0.47)


XLE Forecast + Options Trading Strategies   XLE  Energy Select Sector SPDR (-0.36)


ETRN Forecast + Options Trading Strategies   ETRN  Equitrans Midstream (-0.58)



Uncorrelated Assets

Assets with little price relationship to RWT



XLE Forecast + Options Trading Strategies   XLE  Energy Select Sector SPDR (-0.36)


LI Forecast + Options Trading Strategies   LI  Li Auto (0.47)


ETRN Forecast + Options Trading Strategies   ETRN  Equitrans Midstream (-0.58)


VFC Forecast + Options Trading Strategies   VFC  VF (0.8)



Anticorrelated Assets

Assets that tend to move strongly against RWT



VFC Forecast + Options Trading Strategies   VFC  VF (0.8)


LI Forecast + Options Trading Strategies   LI  Li Auto (0.47)


XLE Forecast + Options Trading Strategies   XLE  Energy Select Sector SPDR (-0.36)


ETRN Forecast + Options Trading Strategies   ETRN  Equitrans Midstream (-0.58)





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