Snopes reports that this isn't just an urban legend:
Claim: In the days just prior to the September 11 terrorist attacks, the stocks of United and American Airlines were shorted by parties unknown.
Status: True.
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Options are wagers that the price of a 100-share block of a particular stock will rise or fall by a certain date. "Puts" are "shorts" — bets the stock price will fall. "Calls" are bets the price will rise. Thus, one who has reason to believe a particular company is about to suffer a terrible reversal of fortune would purchase "puts" against that entity's stock.
***
The Chicago Board Options Exchange is investigating each of these trades and at this time is declining to offer comment on its progress. The volume traded and the one-sidedness of the trades, however, make it clear that those who had knowledge of the details of the attacks (which airlines would be involved and that the World Trade Center was a target) were behind them and stood to profit mightily from them.
(Via
Tom Maguire).
