US regulators examine unusual Grumman activity

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NEW YORK - US securities regulators are investigating heavy buying of share options of Grumman Corporation before Monday's announcement of its merger with Martin Marietta, another defence contractor, writes Larry Black.

Shares in Grumman rose almost 10 per cent last Friday, in part the result of strong buying last week on the Chicago Board Options Exchange through a number of brokers. Executives of Grumman and Martin Marietta complained about the price surge when they announced the dollars 55-a-share offer on Monday. Stephen Taylor, a specialist in Grumman options at the Exchange, also filed a complaint on Tuesday, citing unusual activity in April call options on Grumman shares.

An investor would have been able to buy a Grumman call option contract - awarding him the right to buy 100 shares at dollars 45 apiece - for about dollars 25 last Wednesday, making a profit of dollars 900 per contract when it was redeemed on Monday.

The US Securities and Exchange Commission and Chicago options market are also investigating.