Very High Put Buying of UAL, Morgan Stanley, Re-Insurance Firms according to Bloomberg....
quote.bloomberg.com
09/17 19:13
UAL, AMR Options Soared; U.S. Probes Pre-Attack Trading Surge
By Judy Mathewson and Michael Nol
Washington, Sept. 17 (Bloomberg) -- Trading skyrocketed in options that bet on a drop in UAL Corp. and AMR Corp. stock during the days before terrorists crashed hijacked United and American airlines jets into the World Trade Center and the Pentagon.
Morgan Stanley Dean Witter & Co., which occupied 22 floors of the 110-story 2 World Trade Center, and Merrill Lynch & Co., with headquarters near the destroyed twin towers, also experienced pre- attack trading of 12 times to more than 25 times the usual volume in so-called put options that profit when stock prices fall, according to Bloomberg data.
The U.S. Securities and Exchange Commission and German regulators today said they are investigating whether terrorists raised money from insider trading on their knowledge of attacks that devastated New York's financial district and closed U.S. stock markets for four days.
``They not only set out to destroy capitalism, but also to beat us at our own game,'' said Duke University law professor James Cox. ``These are people who hate capitalism and see that you can turn capitalism against itself.''
On the day before the Sept. 11 attack, for example, 1,535 contracts changed hands on options that let investors profit if AMR stock falls below $30 per share before Oct. 20. That was almost five times the total number of those options traded before that day, according to Bloomberg data.
AMR shares fell $11.70 today to $18. The per-share price of those October $30 put options jumped to $10.50 today from $2.20 last Monday.
`Terrorist Involvement'
Similarly, October $30 put options for UAL soared, with 2,000 contracts traded on Sept. 6, three trading days before the attack compared with a total of 27 contracts before that day. A contract represents 100 shares.
UAL stock fell $13.32 today to $17.50, and the price of put options, which profit if stock in United Airlines' parent falls below $30, soared to $12 per share from 90 cents on Sept. 6.
``We've heard those reports about terrorist involvement in our markets,'' SEC Chairman Harvey Pitt said in a statement. ``Our enforcement division has been looking into a variety of market actions that could be linked to these terrible acts including the subjects of the rumors.''
Trading records may help show whether Osama bin Laden or other terrorists were behind suspicious trading in airline, brokerage, and insurance stocks or options, and may help securities regulators trace a money trail to some of those responsible for the attacks at the World Trade Center.
Evidence of Murder Plans
``It's a matter of great interest to intelligence. To the extent we find this evidence, we shouldn't just focus on it as proof of insider trading but as evidence of a desire to commit murder and terrorism,'' said Columbia University law professor John Coffee.
Deutsche Boerse AG spokesman Frank Hartmann said that exchange and German regulators also are examining trading in stocks, options, and futures before the Sept. 11 attack. On Sept. 6 and Sept. 7, trading almost doubled the average for the past six months in shares of Munich Re, the biggest reinsurer. Initial spot checks had found nothing irregular, Hartmann said.
A spokeswoman for the Chicago Board Options Exchange declined comment. Japanese securities regulators also are examining trading patterns of Topix futures at the Tokyo Stock Exchange and Nikkei futures at the Osaka Stock Exchange, the Jiji news service reported, without citing sources.
The prospect of insider trading based on knowledge of the attacks suggests a good deal of sophistication on the part of far- flung terrorist networks, which may have used U.S. markets to raise money for more assaults.
`Sophisticated Strategists'
``It sure presents these people on a whole different level as sophisticated strategists rather than religious zealots,'' Coffee said. ``I suppose from their standpoint ... they're trying to pay for future terrorist activities by profiting from their past terrorist activities.''
At Morgan Stanley, trading in October $45 puts jumped to 2,157 contracts from Sept. 6 to Sept. 10, almost 27 times a previous daily average of 27 contracts. Options to sell Merrill Lynch shares for $45 apiece before Sept. 22 had 12,215 contracts traded from Sept. 5 to Sept. 10, 12 times the earlier daily average of 252. Morgan Stanley shares fell $6.40 today to $42.50. Merrill Lynch shares fell $5.37 to $41.48.
Other brokerage and insurance companies where options trading surged include:
-- Bear Stearns & Cos., where investors traded 3,979 contracts from Sept. 6 to Sept. 10 on September options that profit if shares fall below $50. The previous average volume for those options was 22 contracts. Bear Stearns shares fell $3.79 today to $46.45.
-- Marsh & McLennan Cos., the biggest insurance brokerage, which had 1,700 employees working in the World Trade Center. Traders on Sept. 10 exchanged 1,209 contracts on options that profit if company shares fall below $90 through the third week of September. Previously, 13 contracts had traded on an average day. Marsh & McLennan shares fell $2.50 today to $84.50. |
