We hit our final profit target for 50% of remaining position at 7.00 (entry 6.60), with +6% grs/ +117% ann. return on the long Allianz / short Axa spread.
This gave us a total return on the spread of +4.5% grs / +96% ann.
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.
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 Fri Oct 10, +3.0%grs / +75% ann. rtn]
2. Balance at 6.90 / 7.00 (+4.5% / 6.0%).
[Completed Thu Oct 17, +6.0%grs / +117% ann. rtn]
Total return: +4.5% grs / 96% ann.
Time horizon: Short-term.
Allianz / Axa spread update on closing final leg
— Edited by Adam Courtenay
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