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Moran Discloses Big Options Losses

Rep. James Moran (D-Va.), whose troubled finances have drawn both public scrutiny and the occasional threat of personal bankrupcy, suffered more than $20,000 in fresh losses from high-risk options trading last year, according to new financial disclosures.

The losses are the latest manifestation of Moran’s hard-luck streak in the markets, which have socked the lawmaker for nearly $320,000 in recent years, according to the disclosures.

Yet such setbacks are only a portion of the lawmaker’s grim financial picture. Moran has faced both mountains of debt in recent years and questions about his uncoventional attempts to reduce it. These have included a personal loan from lobbyist Terry Lierman and a uniquely favorable mortgage-refinancing package from banking giant MBNA.

“I’m the poorest Member of Congress,” Moran said in a brief interview. A spokesman for the lawmaker said only that there is “nothing new” in the report.

Moran’s trades, which occurred mainly in January 2003, amounted to bets on changes in the value of index funds. In one 10-day period, the lawmaker traded in options six times. On two occasions, Moran lost the entire value of his investment — about $20,000.

Trading in stock or other options comes down to to a series of transactions known as “calls” and “puts.” They are contracts that provide an investor with the right to buy (call) or sell (put) an agreed number of shares at an agreed price within an agreed time frame.

For instance, with a call, an investor is betting the value of his shares will rise during the agreed period. At the end of the period, the investor can exercise his right to purchase the shares at the lower price.

Conversely, the holder of a put wagers that the value of the shares will fall, enabling him to sell the asset for a profit at the higher price.

The complexity of options trading means that it is typically done by sophisticated investors and market professionals.

Stan Brand, a legal expert in Congressional disclosure, said it is rare, in his experience, to find lawmakers who trade in options — most likely because of the level of risk involved. When Sen. Hillary Rodham Clinton (D-N.Y.) was first lady, she faced a controversy over her trading years earlier in cattle futures, which operate on similar principles.

The clutch of options held briefly by Moran were the only assets the lawmaker reported for last year. The seven-term lawmaker, who faced and overcame his first primary challenge this month, disclosed as much as $165,000 in outstanding liabilities. These appear to have carried over from previous years.

Asked how he plans to take care of the liabilities, Moran said, “I have no plans.”

Colin Gustafson contributed to this report.

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