A Pair Trade Opportunity By Annaly Capital Preferreds

Arbitrage TraderInvesting Group LeaderFollow5ShareSavePlay(10min)CommentsSummaryAnnaly Capital Management presents a pair trade opportunity between its floating-rate preferreds, exploiting current mispricing amid heightened market volatility.Rising benchmark yields and falling equity markets increase the likelihood of credit spread widening.NLY-G is overvalued relative to NLY-I, with the tightest credit spread and lower yield, making it a compelling short leg versus a long in NLY-I.The trade is virtually credit risk-free, with a manageable drawdown, and should be unwound if market volatility and yields subside.Trade With Beta members get exclusive access to our real-world portfolio. See all our investments here » PM Images/DigitalVision via Getty Images Co-authored by Relative Value. Overview When market conditions show increased uncertainty and the associated high volatility, we tend to look for safer trading/investment ideas. Pair trades among similar securities of the same issuer are a prime example of such an approach, as theyThis article was written byArbitrage Trader15.7K FollowersFollowArbitrage Trader, aka Denislav Iliev has been day trading for 15+ years and leads a team of 40 analysts. They identify mispriced investments in fixed-income and closed-end funds based on simple-to-understand financial logic. Denislav leads the investing group Trade With Beta, features of the service include: frequent picks for mispriced preferred stocks and baby bonds, weekly reviews of 1200+ equities, IPO previews, hedging strategies, an actively managed portfolio, and chat for discussion. Learn more.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in NLY.PR.I over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.