by Allen M. Poteshman University of Illinois at Urbana-Champaign
Unusual Option Market Activity and the Terrorist Attacks of September 11, 2001 Author(s): Allen M. Poteshman
Source: The Journal of Business , Vol. 79, No. 4 (July 2006), pp. 1703-1726 Published by: The University of Chicago Press
Stable URL: https://www.jstor.org/stable/10.1086/503645
Summary:
Following the 9/11 attacks, a great deal of speculation arose about unusual options trading activity, particularly put options on airlines like United and American, which were seen as potential evidence of insider trading by terrorists. However, thorough investigations by the SEC and the 9/11 Commission found that these seemingly suspicious trades had innocuous explanations, such as a single institutional investor's hedging strategy and recommendations from a trading newsletter. While there was significant abnormal trading in the S&P 500 index options after the attacks, indicating overall market bearishness, these pre-9/11 airline trades were determined to be unrelated to the terrorist actions.
