It looks like you're using an Ad Blocker.
Please white-list or disable AboveTopSecret.com in your ad-blocking tool.
Some features of ATS will be disabled while you continue to use an ad-blocker.
Before attack: Many put options of hijacked planes' parent companies purchased
Posted: Wednesday, September 19, 2001
By 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 source.
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.
Citing client privacy, Henschel declined to say which companies Convar is working for, or provide details about the data retrieved so far. But he said the raw material, up to 40 gigabytes per computer hard drive, is sent immediately by satellite or courier back to New York.
Richard Wagner, a data retrieval expert at the company, said illegal transfers of more than $100 million might have been made immediately before and during the disaster.
"There is a suspicion that some people had advance knowledge of the approximate time of the plane crashes in order to move out amounts exceeding $100 million," Wagner said. "They thought that the records of their transactions could not be traced after the main frames were destroyed."
The companies are paying between $20,000 and $30,000 for each computer recovered, Henschel said.
The high recovery costs are one reason why only a limited number of hard drives are being examined.
Henschel said the companies in the United States were working together with the FBI to piece together what happened on September 11 and that he was confident the destination of the dubious transactions would one day be tracked down.
"We have been quite surprised that so many of the hard drives were in good enough shape to retrieve the data," he said.
"The contamination rate is high. The fine dust that was everywhere in the area got pressed under high pressure into the drives. But we've still been able to retrieve 100 percent of the data on most of the drives we've received.
"We're helping them find out what happened to the computers on September 11 as quickly as possible. I'm sure that one day they will know what happened to the money."