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Insider Trading before 9/11

There was an unusually large jump in purchases of put options on the stocks of UAL Corp. and AMR Corp. in the three business days before the attack on major options exchanges in the United States. On one day, UAL put option purchases were 25 times greater than the year-to-date average. In the month before the attacks, short sales jumped by 40 percent for UAL and 20 percent for American.

A put option gives the buyer a right to sell the underlying security at a certain price on a certain date; the purchaser profits when the share price drops lower than the agreed sale price. In a short sale, an investor borrows stock from a broker and sells it, hoping to buy it back at a lower price.

An estimated $5 million to $10 million in all could have been made on the trades, including trading on other days and purchases of options on the parent company of American, AMR Corp.

Four United and American aircraft crashed in the attacks.

Insiders profited by nearly $16 million.

The money was made on Sept. 6, 7 and 10 in transactions involving United, American, Morgan Stanley Dean Witter & Co. and Merrill Lynch & Co., the center said. Morgan Stanley occupied 22 floors of the World Trade Center; Merrill Lynch's headquarters offices were nearby.

The figure excluded other unusual trades involving insurance companies with significant exposure to damage claims resulting from the attacks. These include Munich Re of Germany, which expects to pay out more than $1.5 billion, and the AXA Group, a French firm, which could be on the hook for $550 million.

This was already known just a couple days after 9/11 and one should think that the insider traders would be identified, arrested and cross-examined meanwhile.

Just why did it not yet happen?

some of the sources: CNN, San Francisco Chronicle, BBC, newstelegraph