Chubb (CB) Surges 3.5% on Merger Rumors: Is This the Start of a New Bull Run?

Summary
• Chubb (CB) rockets 3.5% to $306.91, hitting a 52-week high of $308.31
• Merger speculation with AIG dominates headlines despite denials from both companies
• Options volume surges with 150,000+ contracts traded, signaling high volatility

Chubb’s sharp intraday rally has ignited a frenzy among investors, driven by unconfirmed merger rumors with American International Group (AIG). The stock’s 3.5% surge—its largest one-day gain in months—has outpaced a mixed performance in the broader Property & Casualty Insurance sector. With options activity spiking and technical indicators flashing bullish signals, the question now is whether this is a fleeting spike or the start of a sustained breakout.

Merger Speculation Ignites Chubb's Rally
Chubb’s explosive move stems from a report by Insurance Insider claiming the insurer made an 'informal takeover approach' to AIG. While Chubb denied making an 'offer,' the ambiguity has fueled speculation. Wall Street is split: Cantor Fitzgerald calls a deal 'very unlikely,' while Piper Sandler and Bank of America suggest it's 'possible.' AIG’s 'not for sale' stance adds intrigue. Investors appear to be betting that Chubb’s standalone value—trading at just 12.76x earnings—makes it a more attractive play than a costly acquisition. The stock’s 3.5% gain reflects optimism that Chubb can outperform as a standalone entity, even as merger talks remain unconfirmed.

Property & Casualty Insurance Sector Mixed as Chubb Outperforms
The broader Property & Casualty Insurance sector showed mixed momentum, with Allstate (ALL) rising 3.1% and peers like The Hartford lagging. Chubb’s rally, however, is decoupled from sector trends, driven purely by merger speculation. Sector news highlighted a $6 billion 3M settlement and underwriting losses, but these factors had minimal impact on Chubb’s price action. The stock’s outperformance underscores how merger rumors can create isolated momentum, even in a sector grappling with broader challenges.

Options and ETFs to Capitalize on Chubb's Volatility
• RSI: 55.01 (neutral to bullish)
• MACD: 3.02 (bullish), Signal Line: 3.38 (bearish), Histogram: -0.36 (bearish divergence)
• Bollinger Bands: Price at $306.91 (above middle band of $296.15)
• 200-day MA: $283.90 (well below current price)

Chubb’s technicals suggest a short-term bullish bias, with the 52-week high at $308.31 acting as a critical resistance. The RSI hovering near 55 indicates room for further upside, while the bearish MACD histogram warns of potential exhaustion. For options traders, the CB20251219C305 and CB20251219C310 contracts stand out:

• CB20251219C305: Call option with 305 strike, expiring Dec 19. IV: 18.37%, Leverage: 70.74%, Delta: 0.574, Theta: -0.728, Gamma: 0.0443. High leverage and moderate delta make this ideal for a 5% upside scenario (targeting $322.25).
• CB20251219C310: Call option with 310 strike, expiring Dec 19. IV: 16.82%, Leverage: 170.17%, Delta: 0.339, Theta: -0.485, Gamma: 0.0452. Strong gamma and high leverage suit aggressive bulls expecting a breakout above $310.

Payoff estimates: At a 5% upside (to $322.25), CB20251219C305 yields $17.25 per contract, while CB20251219C310 nets $12.25. Both contracts offer high reward-to-risk ratios given their liquidity and volatility. Aggressive bulls should target a close above $308.31 to confirm the breakout; a failure to hold $300 would signal a reversal.

Backtest Chubb Stock Performance
The backtest of the CB's performance after an intraday surge of at least 3% from 2022 to the present shows favorable results. The 3-day win rate is 52.85%, the 10-day win rate is 57.37%, and the 30-day win rate is 62.28%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest was 2.62%, which occurred on day 59, suggesting that while the CB can deliver moderate returns, the maximum gain is not consistently high.

Chubb's Merger Drama: Time to Ride the Wave or Cut Losses?
Chubb’s rally hinges on the resolution of merger speculation. A confirmed deal could cap upside, while a denial might trigger profit-taking. Technicals suggest a short-term bullish bias, but the bearish MACD histogram warns of potential exhaustion. Investors should monitor the $308.31 52-week high and key options activity. Meanwhile, sector leader Allstate (ALL) rose 3.1%, signaling broader insurance sector resilience. For now, ride the momentum but set tight stops below $300. If the merger rumors fade, Chubb’s low valuation (12.76x) offers a safety net for long-term investors.