here’s two facts that can’t be disputed: 1) in the days before september 11, 2001, somebody made a very specific, very well-timed bet against united airlines and american airlines stock. was it luck or knowledge? 2) a group of people in NJ seemed to celebrate the events from their view acrss the Hudson River, and they seemed to have Israeli ties. was it coincidence or even a scapegoat plot?
the blind sheep will investigate…
the trade itself
a “put option” is a bet that a stock’s price will fall. buy enough of them right before a stock craters, and you can make a fortune off bad news nobody else saw coming.
in the first week of september 2001, put option volume on UAL (the parent company of united airlines) spiked hard on september 6th and 7th. days later, on september 10th, the same thing happened with AMR (american airlines’ parent company). one day after that, both airlines had planes flown into the world trade center.
when the markets reopened on september 17th (they were closed for nearly a week after the attacks), united’s stock dropped about 43%. american dropped close to 40%. whoever bought those puts didn’t just get lucky, they got rich.
and here’s the detail that kept this theory alive for 20+ years: it wasn’t a bad week for airlines broadly. it was united and american specifically. the two airlines whose planes were hijacked.
what the investigation actually found
the SEC, the FBI, and later the 9/11 Commission all dug into this. not as a formality, but as a real investigation into potential insider trading tied to a terrorist attack. their conclusion, stated plainly in the commission’s final report: “the investigation has found no evidence that anyone with advance knowledge of the terrorist attacks profited through securities transactions.”
the specific explanation for the united spike: investigators traced 95% of the september 6th UAL puts to a single U.S.-based institutional investor with no connection to al-qaeda, executing a trading strategy that also involved buying 115,000 shares of american airlines stock on september 10th. the kind of paired position professional traders use to hedge, not the kind of move you’d make if you were betting the whole industry was about to get attacked.
the american airlines spike had an even more mundane explanation: a market newsletter called option hotline was faxed to subscribers on sunday, september 9th, specifically recommending puts on american because the stock was “under pressure.” a newsletter recommendation, not a tip from inside the plot.
no other airlines saw unusual options activity. no other industries did either. investigators called every suspicious trade they found back to a real, boring, unrelated reason.
so what happened with the trade?
if that were the whole story, this theory would’ve died in 2004. a widely cited study found that short selling on united and american jumped roughly 40% in the days before the attacks, compared to an industry-wide increase of only about 11% during that period’s broader market downturn. multiple peer-reviewed papers, including work published by researchers using standard options-pricing models, have identified statistically unusual activity in the run-up to 9/11 that they argue is consistent with informed trading, not coincidence.
the 9/11 Commission’s critics make a fair point: “no conceivable ties to al-qaeda” is a reasonable standard for ruling out the hijackers personally profiting. it’s a much weaker standard for ruling out a third party who knew something was coming and made money on it without needing any connection to the attackers at all.
the official record says: two coincidences, a hedge fund’s ordinary strategy, and a newsletter’s bad-timed stock tip, all landing in the same 72-hour window as the worst terrorist attack in u.s. history.
the skeptics say: a 40% spike in short interest concentrated on exactly the two airlines involved, dismissed using a standard that only rules out the hijackers, not anyone else who might have known. it’s not like dick cheney made money off the iraqi war or anything (*insert sarcasm)
maybe all of this could b true at the same time. we’re not going to tell you which explanation you should walk away with. we’re going to tell you to actually read the 9/11 commission’s own trading footnote, then read the academic pushback, and decide for yourself whether “innocuous” is doing more work in that report than the evidence can carry.
now what about the jews?
my research can’t tie israel to the short positions, but it does find us one crazy story. hours after the attacks started, a group of 5 men were reported to the police and seen by multiple people across the hudson river in NJ w/a direct view of the manhattan skyline. people reported they were standing on top of a white van filming the aftermaths. they were described as dancing, laughing and joking with each other as if they were celebrating.
all five men were Israeli citizens and arrested by police. they were in custody for over 2 months and interrogated multiple times before being deported back to Israel.
the “dancing israelis” didn’t give up much info in the questioning. two of them were believed to be agents for Mossad (israeli secret service) but no explanation for the behavior ever released. maybe Mossad had prior knowledge or had put them there on purpose, and maybe they were just excited they were capturing good content. or were they plants from al-quaeda to blame the jews (honestly likely if we believe al-quaeda was really masterminding this entire plot from their caves *insert more sarcasm).
it remains a bizarre mystery that can’t be explained. and unlikely that any further info ever releases on it. but both of these stories are crazy twists to a day that is mainly remembered for the lives lost and airplane disasters.
open your eyes.
sources & further reading: the 9/11 commission report, appendix — “the financing of the 9/11 plot” (2004); SEC pre-9/11 trading review; poteshman, “unusual option market activity and the terrorist attacks of september 11, 2001,” journal of business (2006); chesney, crameri & mancini, “detecting informed trading activities in the options markets” (2015).