Unusual Options Market Activity with an Application to the Terrorist Attacks of Septe

fortuna · Jan 20, 2003

a great study

Abstract: After the terrorist attacks of September 11, 2001 there was a great deal of speculation that the terrorists or their associates had traded in the options market on advanced knowledge of the impending events. It is nearly impossible, however, to assess the options market trading leading up to this or any other event in the absence of systematic information about the characteristics of options market activity. This paper provides this information by computing the distributions of certain options market volume ratios and put and call trading indicators both unconditionally and when conditioning on the overall level of options activity, the return and trading volume on the underlying stocks, and the return on the overall market. When the options market activity in the days leading up to the terrorist attacks is compared to the benchmark distributions, the volume ratios and call volume indicator are seen to be at typical levels but the put volume indicator appears to be unusually high.

opmtrader · Jan 20, 2003

Fortuna,

Looks interesting. I can't believe these bloodthirsty bastards would make so much money off of their murders. I'd like to read this paper. Can you please post the link?

Thanks.

qdz2 · Jan 20, 2003

Options markets are dirty evil laundry, IMO.

metooxx · Jan 20, 2003

Quote from fortuna:

a great study

Abstract: After the terrorist attacks of September 11, 2001 there was a great deal of speculation that the terrorists or their associates had traded in the options market on advanced knowledge of the impending events. It is nearly impossible, however, to assess the options market trading leading up to this or any other event in the absence of systematic information about the characteristics of options market activity. This paper provides this information by computing the distributions of certain options market volume ratios and put and call trading indicators both unconditionally and when conditioning on the overall level of options activity, the return and trading volume on the underlying stocks, and the return on the overall market. When the options market activity in the days leading up to the terrorist attacks is compared to the benchmark distributions, the volume ratios and call volume indicator are seen to be at typical levels but the put volume indicator appears to be unusually high.

After 9-11 we got a call from the SEC questioning the reason for a number of trades; after that experience all I have to say is they don't have a clue ...

Babak · Jan 20, 2003

care to elaborate?

did they know their calls from their puts? their iron butterflies from their condors?

GATrader · Jan 20, 2003

Most of the guys who did this lived in tenements, living hand to mouth until their cash arrived from abroad in small bills to go around money laundering/reporting requirements. Even series 7 registered reps at Schwab barely broach what a put/call is. Let's not give these guys too much credit.

omcate · Jan 20, 2003

Quote from fortuna:

a great study

Abstract: After the terrorist attacks of September 11, 2001 there was a great deal of speculation that the terrorists or their associates had traded in the options market on advanced knowledge of the impending events. It is nearly impossible, however, to assess the options market trading leading up to this or any other event in the absence of systematic information about the characteristics of options market activity. This paper provides this information by computing the distributions of certain options market volume ratios and put and call trading indicators both unconditionally and when conditioning on the overall level of options activity, the return and trading volume on the underlying stocks, and the return on the overall market. When the options market activity in the days leading up to the terrorist attacks is compared to the benchmark distributions, the volume ratios and call volume indicator are seen to be at typical levels but the put volume indicator appears to be unusually high.

There was rumor that someone or some organizations have shorted the stocks of insurance companies before the 911 attack. Similar articles were posted on Yahoo Finance, Bloomberg, etc. I did not recall there was any follow-up. I think most people have forgotten that.

metooxx · Jan 20, 2003

Quote from Babak:

care to elaborate?

did they know their calls from their puts? their iron butterflies from their condors?

No they didn't.

They actually called on a handful of test 1 lots that half of them were on the wrong side, all of them we were flat on and most of them we made $5 or $10 dollars on. They even were kind enough to read me my rights. When I quit laughing at their ineptitude; I called back and offered our data mining capabilities to them. They declined the offer and politely informed me that they were the experts in that field.

I could tell ...

metooxx · Jan 20, 2003

Quote from omcate:

There was rumor that someone or some organizations have shorted the stocks of insurance companies before the 911 attack. Similar articles were posted on Yahoo Finance, Bloomberg, etc. I did not recall there was any follow-up. I think most people have forgotten that.

It was all bullshit ...

omcate · Jan 20, 2003

Quote from metooxx:

It was all bullshit ...

For details, please refer to
http://www.asensio.com/ShortSellingtied to terrorist.htm

September 18, 2001

Short selling tied to last weekâs terrorist act.

The following statement is delivered in response to inquiries concerning news reports that certain accounts owned or managed by individuals who may have had prior knowledge of the terrorist attacks may have traded in the securities of companies that were directly related and adversely affected by last weekâs horrific terrorist acts.

Manuel P. Asensio, Chairman of Asensio & Company, Inc. states the following:

"Any account anywhere in the world that traded suspiciously must be investigated. Suspicious trading means the establishment or maintenance of a large or concentrated position in the stock, bonds or options of any publicly-traded company that was directly impacted by the horrific events. This includes all tenants and businesses with material operations in the affected areas as well as airlines and insurance companies. The investigation can be aided by SEC officials but can not in any way be considered a securities trading matter."

Asensio & Company, Inc. is a New York-based institutional investment bank specializing in corporate valuations and equity research. Asensio & Company also specializes in investigating fraudulent stock promotions and publishing research on companies it identifies as grossly overvalued, as defined. A complete documented history of Asensioâs published work with fraudulent securities transactions, and the firmâs definition of gross overvaluation, is available on the Internet at www.asensio.com. Asensio & Company is actively engaged in short selling and advises its clients on securities it believes are overvalued. Short selling involves a risk not associated with the purchase of stock including, but not only limited to, unlimited loss and stock borrowing risks. Additional information is available upon request.