Exchange examines odd jump
Before attack: Many put options of hijacked planes' parent companies purchased
By Dave Carpenter
The Associated Press
CHICAGO -- The Chicago
Board Options Exchange, the world's largest options market, said
Tuesday it is investigating reports of unusual trading activity before
last week's terrorist attacks in New York and Washington.
The statement comes
amid widespread international efforts by investigators and regulators
to determine whether terrorists tried to profit from stock and option
trading ahead of the attacks on the World Trade Center and the Pentagon.
In the days before the
attacks, unusually high numbers of put options were purchased for the
stocks of AMR Corp. and UAL Corp., the parent companies of American
Airlines and United Airlines, which each had two planes hijacked. There
was no such trend involving other carriers.
A put option is a contract that gives a holder the right to sell an asset at a specified price before a certain date.
On Sept. 6-7, when
there was no significant news or stock price movement involving United,
the Chicago exchange handled 4,744 put options for UAL stock, compared
with just 396 call options -- essentially bets that the price will
rise. On Sept. 10, an uneventful day for American, the volume was 748
calls and 4,516 puts, based on a check of option trading records.
On Monday, the first
day of trading following the attacks, shares of AMR fell 39 percent,
and UAL stock plunged 42 percent. Other airline shares also were
sharply lower and most rebounded modestly Tuesday.
"I saw put-call
numbers higher than I've ever seen in 10 years of following the
markets, particularly the options markets," John Kinnucan, a principal
of Broadband Research, an independent telecommunications research firm,
told the San Francisco Chronicle. "When one sees this type of activity,
the first thing one does is ask oneself, 'What is the explanation? What
are people worried about?' "
According to a report
in The Wall Street Journal, the SEC said it had received information
from various U.S. agencies Friday about possible trading by terrorists
in industries affected by the bombing, including insurance and the
airlines, and also about possible put-option or futures-index trading.
On Monday, Germany's
stock market regulator said it was looking into claims of suspicious
short-selling just before the Sept. 11 attacks. Washington and several
other governments have identified Osama bin Laden as a prime suspect.
The Chicago exchange,
which often investigates reports of suspicious trading linked to
possible advance knowledge of takeovers or mergers, declined to
elaborate on the investigation.
"As is usual, CBOE is
conducting an investigation of trading prior to the news event," said
chief spokeswoman Lynne Howard, who declined further comment.
Spokesmen for the Securities and Exchange Commission also refused comment.
The SEC has received
information from other U.S. regulators about possible suspicious
trading earlier this month in put options, according to a government
The Chicago exchange
trades options on the stocks of about 1,400 companies along with 38
stock-based indexes, including the Dow Jones industrial average, the
S&P 500 and the Nasdaq 100.
All nose-dived in the
aftermath of the attacks, which would have meant substantial profits
for anyone who had bet on their decline by buying put options or
through short-selling. Short-sellers borrow stock and sell it in
anticipation of buying it back later at a lower price.
On the Net:
CBOE at www.cboe.com
The Options Clearing Corp. at www.optionsclearing.com