LONDON (AP) — As get-rich-quick plans go, it wasn’t well thought out.
The man accused of bombing the bus carrying the Borussia Dortmund soccer team allegedly hoped to make millions off an expected slump in the team’s share price by using an obscure financial trade, a “put option.”
These trades are typically used by professional traders at banks or investment firms, suggesting the bomber had some experience with financial markets. The average person who wanted to make money off a dropping share price would more likely have taken out a bet on one of innumerable gambling websites or used a day-trading website.
“It indicates someone with a bit more financial awareness than your average person,” said Chris Beauchamp, senior market analyst at IG Group in London.
WHAT KIND OF TRADE DID HE USE?
Buying “put options,” as the suspect allegedly did, gives the trader the right to sell a stock at an agreed price. So if the stock drops, the trader can use the option to sell the shares at the higher price. By then buying them back at the lower price on that day, he earns a profit.
It’s a form of insurance, and is something companies use to protect themselves against the risk of volatility in financial markets.
Options can be very expensive to buy, although online trading systems now make them accessible to anyone, experts say. German prosecutors say the 28-year-old suspect took out a five-figure loan to buy thousands of them against Borussia Dortmund’s shares on the same day as the April 11 bus attack. The team is the only top-league German club that has shares listed on a stock exchange.
WHY SUCH A COMPLICATED TRADE?
Trading experts say it would have been easier to profit from a drop in the share price by simply “shorting” the soccer team’s stock through an online trading website. Shorting a stock means selling shares you don’t own, with the obligation of buying them back at some point. That can be risky, however, causing big losses if the shares go up instead of down.
While more complicated to trade in, the advantage of a “put option” over “shorting the stock” is that the trader has the right to decide whether — and when — to use it. If the stock had gone up, instead of down, he could simply have canceled the trade at a relatively low cost.
“He may have wanted to wait and see how the shares reacted and cash in later, for example in case the shares went up in the short term,” said Beauchamp.
COULD THE BOMBER HAVE MADE A LOT OF MONEY?
In theory, yes, though exactly how much is unclear. The bombing damage was, thankfully, limited although one of the team’s defenders was injured and had to have surgery. But if the alleged bomber had killed Dortmund team members, that would probably have caused the shares to drop sharply, giving him the opportunity to make a big profit.
The plan, however, was carried out clumsily. The suspect bought the options from a computer at the same hotel where the soccer team was staying, authorities said. The size and timing of the trade raised the attention of investigators. So even if he had succeeded in causing the shares to drop, he would have been easy to catch.
The plan also seems crude in an age when trading scams tend to rely on more sophisticated — and less deadly — schemes like using insider information or hacking to influence a share price.
Shares in Borussia Dortmund actually rose the day after the bombing attempt and only fell when the team lost its Champions League match later that evening.
On Friday, they rose 2.5 percent to 5.50 euros apiece.
Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
- 7 common ways to get sued by your employees
- Why it might be time to upgrade your toilet
- Arizona teachers are building a better future by using technology in the classroom
- How to make summer reading fun for the whole family
- How to find relief for chronic joint pain
- Can the NBA Lottery save the Suns?
- Skip Urgent Care: 5 ailments you can treat with telemedicine
- Skin Cancer in Arizona: Stats, facts and new immunotherapy drugs making strides
- Distracted walking injuries end up not so funny
- Scary situations: 5 quick tips before you let a contractor in your home
- Four ways telemedicine is changing the health care industry
- 5 mistakes homeowners make in the spring
- Three rivers run through it: Exploring Arizona's waterways
- Smart home basics: things you need to know to get started
- 5 Surprising things causing back pain
- Arizona agriculture is a $17.1B industry
- Timeline: Arizona's roots in brewing history
- 5 reasons to love the D-backs this season
- Tips for taking your home entertainment experience to the backyard
- Tech-related injuries your parents never experienced
- Workers comp: Signs your co-worker could be a fraud
- Who's the real founder of America's pastime?
- Epidemic rising? What you need to know about Alzheimer's in Arizona
- 5 unforgettable Wooden Award winners
- Family and hard work are keys to success of modern dairy farmers
- Genetic testing could hold answers for colon cancer survival
- Cold beers and baseball: A beer lover's guide to Spring Training
- Telecommuting: 5 tips to make it work for employers and employees
- See how top CFOs feel about economic growth in the Valley
- Migraine myths that keep patients from effective treatments
- Main Street Minute: Phoenix job fair will feature Army, bank representatives
- Father of Manchester suicide bomber believes in son’s innocence
- Main Street Minute: Phoenix cracks top 10 for best US spots for meetings
- Main Street Minute: Fried chicken chain expanding in Valley
- Dad of Times Square crash victim leaves note at her memorial