Sunday, October 26, 2014

Lars Schall and Paul Zarembka Dissect the 9/11 Insider Trading - Debunking on Insider Trading

Economics Professor Paul Zarembka, has written in the past that the work of Mike Williams at the debunking site had caused him "to reconsider [his] prior conclusion of high probability of insider trading in put options" for American and United airlines stocks. I have previously stated that I believe the insider trading issue had been effectively debunked.

In this recent interview Zarembka cites new evidence that brings him and myself back to his original conclusion.

Evidence of Insider Trading before September 11th Re-examined

by Paul Zarembka Department of Economics State University of New York at Buffalo September 9, 2011

Evidence of Insider Trading before September 11th Re-examined - See more at:
Two Caveats

Let me put one consideration to rest. Some critics of the 9/11 truth movement, such as Kay (2011), claim that the entire movement is filled with people who go down a rabbit hole, never willing to leave it. In this case, the suggested claim could be that Sarnoff himself should be added to a conspiracy about 9/11, added as soon as the government released in January 2009 its evidence as to who made what recommendation and with what effect regarding American on September 10. Such an approach would address the contradiction we have identified. But it would be at the expense of having no evidence for such an assertion.

We wish to stay with evidence, evidence from the econometricians, the government, and anywhere else obtainable. In other words, we wish to push into the contradiction. ''' Regarding evidence we have to be careful. For Boeing, Mike Williams, seeking to expose myths among skeptics of the official story of September 11th,, cites a Dutch article of September 11, 2006 placed on the site (, accessed August 4, 2011). This article had made only a tangential mention to this airline manufacturer, thus representing no more the proverbial “straw man” – a data source is not even provided. Williams then provides a news report referring to one analyst’s public downgrading of Boeing on September 7th, apparently being unaware that put-options purchases cited by Poteshman were on United occurred on September 6th (as well as in Chesney as we shall see below).4 

Among known skeptics of the official 9/11 story, discussion of option transactions at a site hosted by Jim Hoffman (, accessed August 4, 2011) is embarrassingly out of date, mostly refers to 2001 stories, even though claiming an August 2007 update. Kevin Ryan (2010), followed by Mark Gaffney (2011) whose book Black 9/11 is due for release shortly, each attempt a recent survey, but seem unaware of the Commission documentation on insider trading released in January 2009...

– , accessed 719/2011

4 Within the same discussion, Williams cites many reports of put-option volumes without those using accurate data. Some reported data are about double the actual levels, presumably due to author errors in understanding Optionmetric data which considers the buy and sell sides of one transaction to be distinct. If one is going to criticize, focusing upon those arguing for insider trading using correct data to make their cases seems preferable.

“The main motivation for considering increments in open interests is the following. Large volumes do not necessarily imply that large buy orders are executed because the same put option could be traded several times during the day. In contrast large increments in open interest are originated by large buy orders. These increments also imply that other long investors are unwilling to close their positions forcing the market maker to issue new put options.” (Chesney, et al., pp. 8-9)

In order to abstract from intraday speculation, they compare daily changes in open interest to the reported volumes of transactions (the difference between the two should be small). In other words, purchases are to dominant, with sales or exercises of options small.

This calculation could seem to suggest 103 times in eight and one-quarter years beginning in January 1998. But a stock like AMR stock price fell considerably from April 2002 to a low of $1.25 within one year thereafter implying much higher volumes then required for similar dollar option positions.

Actually, AMR closed at $17.90 on both September 21 and 27 before the October 20 option expiration; the $18.00 on September 17 was not quite the lowest. However, presumably the option price was the highest on September 17.

Let Gt be the cumulative gains achieved through the exercises of the selected option in the shortest time available from the day of the calculated maximum up to ten trading days thereafter. Chesney’s third criterion is then offered as a pair of conditions for the option trade in question, that is,

rtmax ≥ q0.90(rtmax)


Gt ≥ q0.98(Gt).

The quantiles at day t for the rtmax and Gt distributions – q0.90(rtmax ) and q0.98(Gt) – are computed using the preceding two years of data. These criteria are the quantiles for the top 10% of initial profiting and top 2% of total gains. - See more at: