Traders in Israel knew in advance about 7 October attack and made money off it

3 Comments on Traders in Israel knew in advance about 7 October attack and made money off it

1. Trading on Terror?

   https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4652027

   67 Pages Posted: 4 Dec 2023 Last revised: 5 Dec 2023
   Robert J. Jackson, Jr.

   New York University School of Law
   Joshua Mitts

   Columbia Law School

   Date Written: December 4, 2023

   Download link : https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID4652947_code461540.pdf?abstractid=4652027&mirid=1
   Abstract

   Recent scholarship shows that informed traders increasingly disguise trades in economically linked securities such as exchange-traded funds (ETFs). Linking that work to longstanding literature on financial markets’ reactions to military conflict, we document a significant spike in short selling in the principal Israeli-company ETF days before the October 7 Hamas attack. The short selling that day far exceeded the short selling that occurred during numerous other periods of crisis, including the recession following the financial crisis, the 2014 Israel-Gaza war, and the COVID-19 pandemic. Similarly, we identify increases in short selling before the attack in dozens of Israeli companies traded in Tel Aviv. For one Israeli company alone, 4.43 million new shares sold short over the September 14 to October 5 period yielded profits (or approximates avoided losses) of millions on that additional short selling for one out of hundreds of securities traded on the TASE. Although we see no aggregate increase in shorting of Israeli companies on U.S. exchanges, we do identify a sharp and unusual increase, just before the attacks, in trading in risky short-dated options on these companies expiring just after the attacks. We identify similar patterns in the Israeli ETF at times when it was reported that Hamas was planning to execute a similar attack as in October. Our findings suggest that traders informed about the coming attacks profited from these tragic events, and consistent with prior literature we show that trading of this kind occurs in gaps in U.S. and international enforcement of legal prohibitions on informed trading. We contribute to the growing literature on trading related to geopolitical events and offer suggestions for policymakers concerned about profitable trading on the basis of information about coming military conflict.

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   • Compare the chart on page 13 showing a shorts volume of 200k shares on October 2nd, ( 3 days before the reported “Hamas event” ) when normal short volumes rarely exceed single digit thousands, with the text description and the chart on pages 22 & 23, showing the shorts volume on April 3rd, – 2 days before a reported “planned Hamas attack” on April 5th – the eve of passover …

     Someone’s got some explaining to do …

     MG

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     • *( 5 days before the reported “Hamas event” ) on October 7th …

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