Link: Moon of Alabama
The Israeli Haaretz headlines:
Did Hamas Make Billions Betting Against Israeli Shares Before October 7 Massacre?
Giant gambles against Israel on the markets in Tel Aviv and Wall Street days before Hamasí attack made billions. Somebody seems to have known about the plan in advance
The story is unfortunately pay-walled and I have yet to find an archive version of it. An archived version is now available.
We know that Batteridge's law of headlines says:
Any headline that ends in a question mark can be answered by the word no.
It was thereby not Hamas which profited from unusual short positions but likely someone else.
The Haaretz story is based on a very recent study by two law professors with experience in market regulations from New York University and Columbia University.
A PDF file of the study, Trading on Terror?, is available at the Haaretz site.
Its abstract says:
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 marketsí 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 3.2 billion NIS on that additional short selling. 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.
3.2 billion New Israeli Shekel are about $800+ million. And, as I understand it, those only were the profits from a small part of the whole operation.
I am not qualified sufficiently to judge the study but the quoted sources and data seem reasonable.
EIS is an exchange-traded fund that tracks Israeli shares in New York. The spike in shorts volume of EIS was indeed hefty.
The short options were only for a very limited period. At least some would have expired on October 13.
So it definitely looks as if on Monday, October 2, someone was sure enough on that soon something 'bad' would happen to Israel. That someone had enough market knowledge and money to take the risk of a false alarm in exchange for a huge potential profit.
Who that person or group was is for anyone to guess.
Link: Moon of Alabama