Pre-11 September Options Trading — the Documented Record
mechanismIntelligence & Surveillance · Defense & Military-Industrial
The official inquiry found nobody who profited from knowing. Three separate academic studies found trading patterns that should not have been there.
Who they are
The record of options trading in the days before 11 September 2001[1].[2][3][4]
What they do
The engine keeps these as two different questions, because they are.
How it works
The 9/11 Commission concluded that exhaustive investigation 'uncovered no evidence that anyone with advance knowledge of the attacks profited through securities transactions'. Its footnote gives three reasons: the big United Airlines bet was placed by a US investor with no conceivable link to al Qaeda; that same investor simultaneously bought 115,000 shares of American Airlines, which is the opposite of betting on a crash; and much of the American Airlines activity was traced to a trading newsletter faxed to subscribers on 9 September recommending exactly those trades. Separately, three peer-reviewed studies looked at three different kinds of contract - airline shares, S&P 500 index options, and option-market patterns generally - and each reported abnormal activity beforehand, including about $3 million of gains on American and United options.
Why it matters
Finding no identifiable guilty party and finding statistically odd trading are not the same finding, and the map does not merge them. Three things repeated about this topic are dropped here: that the reinsurers involved were in the towers - they are German and Swiss; that the Commission's reasoning was purely about who the traders were - it was not, two of its three reasons are about mechanics; and that the SEC admitted destroying the records - that traces to a personal blog, not to any agency.
The engine's record — word for word
THE OFFICIAL FINDING. The 9/11 Commission Report, page 172, body text carrying footnote marker 130, verbatim: "Exhaustive investigations by the Securities and Exchange Commission, FBI, and other agencies have uncovered no evidence that anyone with advance knowledge of the attacks profited through securities transactions." FOOTNOTE 130 SETS OUT THREE STRANDS OF REASONING, all recorded here because the distinction matters. Identity: "A single U.S.-based institutional investor with no conceivable ties to al Qaeda purchased 95 percent of the UAL puts on September 6". Mechanism, first: that purchase came "as part of a trading strategy that also included buying 115,000 shares of American on September 10" — a long position inconsistent with foreknowledge of a crash. Mechanism, second: "much of the seemingly suspicious trading in American on September 10 was traced to a specific U.S.-based options trading newsletter, faxed to its subscribers on Sunday, September 9, which recommended these trades." THE QUANTITATIVE LITERATURE, ATTRIBUTED CORRECTLY. Poteshman (2006), Journal of Business 79(4) 1703-1726, on AIRLINE EQUITY OPTIONS: "Examination of the option trading leading up to September 11 reveals that there was an unusually high level of put buying. This finding is consistent with informed investors having traded options in advance of the attacks." Wong, Thompson and Teh, Multinational Finance Journal, on S&P 500 INDEX OPTIONS — a different instrument class, chosen because "the airline data have been well studied by Poteshman (2006)": "Our findings from the out-of-the-money (OTM), at-the-money (ATM) and in-the-money (ITM) SPX index put options and ITM SPX index call options lead us to reject the null hypothesis that there was no abnormal trading in these contracts prior to the September 11 attacks", with their own caution that "our findings do not prove definitively that there were insiders". Chesney, Crameri and Mancini, Journal of Empirical Finance 33 (2015) 263-275, on detection method: "Comparable abnormal trades have been found for American Airlines, United Airlines and Boeing... before the terrorist attacks of 9/11"; "a total gain of almost $3 million was realized within a few trading weeks using options with underlying AMR and UAL"; and a section on reinsurers — Munich Re and Swiss Re, whose options trade on EUREX. THE SHAPE OF THE RECORD: the Commission found no profiting party it could identify; three peer-reviewed quantitative studies, across three different instrument classes, report statistically abnormal pre-attack option activity. Those are not the same question and canon does not collapse them. NOT HELD: that the reinsurers were "located within the targeted buildings" — Munich Re and Swiss Re are German and Swiss. NOT HELD: that the Commission's dismissal rested ENTIRELY on identity; the identity clause is real and is quoted above, but two mechanism explanations sit beside it in the same footnote. NOT HELD: the claim that the SEC told FOIA requesters the trading records had been destroyed — it traces to a personal blog with zero occurrences of 'FOIA', and no agency response was retrieved.
Follow the trail
Walk this on the live map →