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Unanswered Questions about the Put-options and 9/11
By Ambrosia Pardue

It was widely reported immediately after 9/11 that insider trading occurred in which trading skyrocketed on put-options that bet on a drop in UAL Corp. and AMR Corp. (parent company to American Airlines) stock in the days before the attacks. According to Bloomberg data, Morgan Stanley Dean Witter & Co. and Merrill Lynch & Co. also experienced pre-attack trading twelve, to more than twenty-five times the usual volume of put-options. Morgan Stanley put-options jumped to 2,157 contracts between September 6 and September 10—almost twenty-seven times a previous daily average of twenty-seven contracts. Merrill Lynch’s daily activities previous to September 11th were 252. 12,215 contracts were traded from September 5 to September 10th. Citigroup Inc. had a jump in trading of about 45 percent. One day before the American Airlines planes were hijacked and crashed, 1,535 contracts were traded on options that let investors profit from the American Airlines stock falls. 1 All companies were linked to the hijacked airplanes or to the World Trade Center. Morgan Stanley occupied twenty-two stories of the WTC and Merrill Lynch had offices nearby.2 Christian Berthelsen and Scott Winokur of The San Francisco Chronicle wrote on September 29, 2001 that as of that date investors had yet to collect more than $2.5 million in profits made in these put stock options of United Airlines, and “the uncollected money raises suspicions that the investors—whose identities and nationalities have not been made public—had advanced knowledge of the strikes.”3

A put option is a contract that gives the holder the right to sell a specified number of shares in a particular stock, usually at a predetermined price, called the strike price, on or before the option’s expiration date—these are the stock index or dollar face value of bonds. The buyer (holder) pays the seller (writer) a premium and the buyer profits from the contract if the stock price drops. If the buyer decides to exercise the option, as opposed to selling it, the seller must buy the security. The seller profits when the underlying security’s price remains the same, rises or drops by less than the premium received.4 A short sale is where an investor borrows stock from a broker and sells it, hoping to buy it back at a lower price.5 A put option bets that a stock will fall, and a call option bets that stock will rise; there were far more put options than call options in the days proceeding September 11th.6 Cooperative Research states that “assuming 4,000 of the options were bought by people with advance knowledge of the imminent attacks, these ‘insiders’ would have profited by almost $5 million.”

Of interesting note is that the firm that handled the purchase of many of the put options on United Airlines, the Bank of Alex Brown, was headed by ‘Buzzy’ Krongard until 1998. Krongard was the deputy director of the CIA during G.W.Bush's first four years. Tom Flocco reported on July 16, 2002 that European reporters found most of the suspicious pre-September 11th trading “passed through Deutsche bank and Alex Brown investment division by means of a procedure called portage, which assures the anonymity of individuals making the transactions.”7

Cooperative Research reported that the Securities and Exchange Commission published a list that included some thirty-eight companies whose stocks may have been traded prior to September 11th by people who had “advanced knowledge” of the attacks. From the Wilderness reported that the CIA, the Israeli Mossad, and many other intelligence agencies monitor stock trading in real time using highly advanced programs. Stock trading irregularities could be used to alert national intelligence services of possible terrorist attacks.

CIA spokesman Tom Crispell denied that the CIA was monitoring U.S. equity markets trading activity prior to September 11th. Tom Flocco has found growing evidence that the FBI and other government intelligence agencies were more closely linked to the pre-September 11th insider trading.8 The San Diego Union-Tribune January 5, 2005 article stated that “a former FBI agent admitted that he gave online stock traders confidential details of federal investigations, including a probe of the Sept. 11 terror attacks.”9

The New York Times, on September 28, 2001, reported that the “short positions and volume of put options rose sharply across the travel industry— which has been cited repeatedly in news reports as possible evidence of illegal trading.” The London Telegraph quoted Ernst Weltek, president of Bundesbank, on September 23, 2001 as saying that “there are ever clearer signs that there were activities on international financial markets that must have been carried out with the necessary expert knowledge.”10 Dylan Ratigan of Bloomberg Business News said that “this could very well be insider trading at the worst, more horrific, most evil use you’ve ever seen in your entire life. This would be one of the most extraordinary coincidences in the history of mankind if it was a coincidence.”11 CBSNews.com quoted McLucas, former Securities and Exchange Commission Enforcement Director, as saying that “the options trading in particular suggests to me that somebody, somewhere, may have had an inkling that something bad was going to happen to certainly those airlines stocks.”12

The 9/11 Commission report scantly covers the stock options issue. On page 499, footnote #130, the 9/11 Commission reports that, "some unusual trading did in fact occur, but such trade proved to have an innocuous explanation….A single U.S. based institutional investor with no conceivable ties to al Qaeda purchased 95% of the UAL puts on September 6 as part of a trading strategy that also included buying 115,000 shares of American on September 10." This explanation only addresses the UAL and American put-options, ignores trades in other companies, and fails to identify the purchaser, thereby leaving even more unanswered questions.

This issue cannot be discounted, overlooked, or debunked as a conspiracy theory. The questions remain: who put in the calls for these options, and are the calls tied to Krongard, the CIA, the alleged terrorists, or others?

End Notes:
1 www.themodernreligion.com/terror/wtc-unusualtrading.html
2 www.themodernreligion.com/terror/wtc-unusualtrading.html
3 www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/09/29/MN186128
4 www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/09/29/MN186128
5 http://66.159.17.51/cooperativeresearch/www/wot/sept11/suspicioustradingact.html
6 www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/09/29/MN186128
7 www.cbsnews.com/stories/2001/09/19/eveningnews/printable311834.shtml
8 scoop.co.nz/stories/HL0207/S00119.htm
9 scoop.co.nz/stories/HL0207/S00119.htm
10 www.signonsandiego.com/uniontrib/20050105/news_1b5elgindy.html.
11 http://www.portal.telegraph.co.uk/news/main/jhtml?xml=/news/2001/09/23/widen23.xml
12 http://fromthewilderness.com/free/ww3/051602_liewontstand.html
13 www.cbs.news.com/stories/2001/09/26/archive/printable 312663.shtml

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