We hit our initial profit target for 50% of the position at 6.80 (entry 6.60), with +3% gross / +75% ann. return on the long Allianz / short Axa spread.
Allianz, the global insurer that owns PIMCO and constitutes around 7.4% of the DAX, was hit by the news on Friday that Bill Gross will be leaving the latter sending Allianz' shares down more than 6%, which is huge for an insurer of this standing.
To put it another way, this was a more than four times standard deviation move and wiped out over $6 billion of equity value. With Allianz closing on Friday at EUR 128.20 and with the 100-day and 200-day moving averages at EUR 127 and EUR 123, it's worth doing the due diligence to see if this is an opportune time to pick up a long position in the insurer or take a view on the short side if one is expecting things to worsen.
We’ve added a few charts of Allianz versus the DAX to highlight the potentially huge disconnection.
(see original post here
Long Allianz / Short AXA
Entry: 6.58/6.60 (perhaps do 50% of the position today on VWAP, two clips of 25% over the next two days).
Target: Exit in two 50% clips
1. Initial clip at 6.80 (+3.0%) [Completed Friday Oct 10, +3.0%grs / +75% ann. rtn]
2. Balance at 6.90 / 7.00 (+4.5% / 6.0%).
Time horizon: Short-term.
Chart: Axa spread update on first profit-taking level
Source: Bloomberg, Saxo Bank
– Edited by Clare MacCarthy
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