By David Russell, reporter at OptionMonster
Call volume in the mortgage-finance stock surged to 1,600 times greater than average as a large investor snapped up 49,500 January 12.50 calls for $2.60, according to OptionMonster's real-time tracking systems. The bullish activity occurred the same session RWT gapped up by 3%, days after making a higher low and pushing above its 50-day moving average.
The stock closed at a two-month high of $14.92 Monday and apparently found support above a level where it peaked earlier in the month. Redwood Trust is organized as a real estate investment trust and is designed to pay large dividends based on playing a steep yield curve.The bullish stock and options activity came despite a lack of news on the company, which has a dividend expiration date Tuesday. Redwood Trust has been showing improving financials with shrinking loan-loss provisions for each of the last five quarters and smaller market losses on its holdings of securities. The company also would benefit from higher long-term interest rates, which reduce the likelihood of homeowners refinancing their mortgages, according to its 10-K. Redwood Trust last reported earnings on Nov. 4 and hasn't yet announced its next release date. Overall in RWT, calls outnumbered puts by 218 to 1. At the time of publication, Russell had no positions in the stocks mentioned.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV