Unusual trading before attacks investigated


The world's largest options market says it is investigating reports of unusual trading activity before last week's terrorist attacks in New York and Washington.

The Chicago Board Options Exchange declined to discuss the investigation.

But an independent check of publicly available options trading records shows unidentified investors placed exceptionally high numbers of put options - bets that prices would fall - on the stocks of United and American, the two airlines targeted in the attacks. There was no such trend involving other carriers.

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 Centre and the Pentagon.

On Monday, Germany's stock market regulator said it was looking into claims of suspicious short-selling just before the September 11 attacks.

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.

The stocks of about 1,400 companies along with 38 stock-based indexes 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.

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.

On September 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 - bets that the price will rise. On September 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% and UAL stock plunged 42%.