Pre-9/11 Put Options on Companies Hurt by Attack Indicates Foreknowledge
Financial transactions in the days before the attack suggest that certain individuals used foreknowledge of the attack to reap huge profits. 1 The evidence of insider trading includes:
* Huge surges in purchases of put options on stocks of the two airlines used in the attack -- United Airlines and American Airlines
* Surges in purchases of put options on stocks of reinsurance companies expected to pay out billions to cover losses from the attack -- Munich Re and the AXA Group
* Surges in purchases of put options on stocks of financial services companies hurt by the attack -- Merrill Lynch & Co., and Morgan Stanley and Bank of America
* Huge surge in purchases of call options of stock of a weapons manufacturer expected to gain from the attack -- Raytheon
* Huge surges in purchases of 5-Year US Treasury Notes
In each case, the anomalous purchases translated into large profits as soon as the stock market opened a week after the attack: put options were used on stocks that would be hurt by the attack, and call options were used on stocks that would benefit.
Put and call options are contracts that allow their holders to sell and buy assets, respectively, at specified prices by a certain date. Put options allow their holders to profit from declines in stock values because they allow stocks to be bought at market price and sold for the higher option price. The ratio of the volume of put option contracts to call option contracts is called the put/call ratio. The ratio is usually less than one, with a value of around 0.8 considered normal.