Just before 9/11 there was an “extraordinary” amount of put options placed on United Airlines and American Airlines stocks. Authorities believed, and some conspiracy theorists continue to maintain, that trading insiders may have known in advance of the coming events of 9/11 and placed their bets accordingly. An analysis into the possibility of insider trading on 9/11 concludes that:
A measure of abnormal long put volume was also examined and seen to be at abnormally high levels in the days leading up to the attacks. Consequently, the paper concludes that there is evidence of unusual option market activity in the days leading up to September 11 that is consistent with investors trading on advance knowledge of the attacks.
—Allen M. Poteshman, The Journal of Business
On the days leading up to 9/11, two airlines saw a rise in their put to call ratio. These two airlines were United Airlines and American Airlines, the two airlines whose planes were hijacked on 9/11. Between 6 and 7 September, the Chicago Board Options Exchange saw purchases of 4,744 “put” option contracts in UAL versus 396 call options. On 10 September, more trading in Chicago saw the purchase of 4,516 put options in American Airlines, the other airline involved in the hijackings. This compares with a mere 748 call options in American purchased that day. No other airline companies saw anomalies in their put to call ratio in the days leading up to the attacks. American Airlines however, had just released a major warning about possible losses.
Insurance companies saw anomalous trading activities as well. Citigroup Inc., which has estimated that its Travelers Insurance unit may pay $500 million in claims from the World Trade Center attack, had about 45 times the normal volume during three trading days before the attack for options that profit if the stock falls below $40. Citigroup shares fell $1.25 in late trading to $38.09. Morgan Stanley, which occupied 22 floors at the World Trade Center, experienced bigger-than-normal pre-attack trading of options that profit when stock prices fall. Other companies that were directly affected by the tragedy had similar jumps.
Raytheon, a defense contractor, had an anomalously high number of call options trading on September 10. A Raytheon option that makes money if shares are more than $25 each had 232 options contracts traded on the day before the attacks, almost six times the total number of trades that had occurred before that day.
The initial options were bought through at least two brokerage firms, including NFS, a subsidiary of Fidelity Investments, and TD Waterhouse. It was estimated that the trader or traders would have realized a five million dollar profit. The Securities and Exchange Commission launched an insider trading investigation in which Osama Bin Laden was a suspect after receiving information from at least one Wall Street Firm.