Redwood Trust Part 3

I forgot to explain my history with Redwood Trust (RWT), so I figured I better explain my interest and how I think about adding to positions. 

I initiated a position in RWT in August 2010 and continued to buy RWT through August 2012 since its stock price continued to drop from my initial purchase and because the business continued to see fundamental improvements.  It ended up becoming my largest position.  As the price spiked in the second half of 2012 and first part of 2013 my allocation to RWT really increased and the future expected returns decreased.  This led me to sell 70% of my shares in RWT, although it is still my fifth largest position.  Typically I would prefer to buy and hold businesses, but since Mr. Market keeps providing opportunities to buy low and sell high, you might as well take advantage of it.  With the price dropping significantly recently it is back on my radar again.  If the price continues to drop I will look at adding back some of the position I sold.   I've actually already sold some out of the money puts at a strike price I think is attractive (plus I wanted to earn some interest on my cash hoard), but will likely buy some shares close to that strike price as well just to make sure I increase my allocation to RWT.  It's possible the price could drop below my strike but then increase above the strike before it gets exercised which is why I would buy some shares as well.  If you can't tell I'm really hoping the stock price goes down so I can buy more.  If it doesn't go down I will earn an OK interest rate on the money I have locked up with my short put position.  I've been increasing my cash holdings as more stock holdings keep hitting my trim targets and with money market yielding 0% shorting put options on businesses I like, at prices I would buy them at, seems to make sense.

If you have any questions please feel free to give a comment and I will try to get back to you shortly.