9/11 Trades: Was It Insider Trading?

Summary

Could the deadliest terrorist attack in modern history have been preceded by suspiciously timed stock market bets? In the days before September 11, 2001, unusual trading activity surged, particularly in the options market for United and American Airlines. On September 6th, demand for United Airlines put options, a bet on a stock's decline, spiked 20 times the normal level, with 96% of trades by a single US investment advisor. Two days later, a newsletter recommended betting against American Airlines stock, leading to a surge in put options on September 10th. When markets reopened after the attacks, both airline stocks plunged about 40%, making these bets incredibly profitable. While academic analysis suggests this activity is statistically consistent with trading on advanced knowledge, official SEC and FBI investigations found no evidence that anyone profited from insider information. The SEC attributed some abnormal activity to analyst downgrades and market conditions, and investigated specific traders. One investment advisor claimed bearish industry views, while the editor of Options Hotline recommended specific put options to subscribers. Ultimately, these investigations concluded no connection to al-Qaeda or advanced knowledge of the attacks, chalking up the suspicious trades to unusual coincidence, leaving the question of insider trading unresolved.