UPDATE 2-VW hedges add 6.8 bln eur windfall to Porsche H1

* Luxury car maker lands bumper profit thanks to VW hedges

* Makes as much from bets on VW shares in H1 as in FY07/08

* Windfall comes after Volkswagen short squeeze in October

* German watchdog finds no wrongdoing in VW short squeeze

* Porsche shares fall more than 6 pct on debt concerns (Adds background, detail)

By Christiaan Hetzner

FRANKFURT, March 31 (Reuters) - Porsche SE (PSHG_p.DE) landed another 6.84 billion euro ($9.0 billion) windfall gain from Volkswagen (VOWG.DE) stock options in its fiscal first half and won a watchdog's ruling that it broke no rules doing so.

Porsche, the maker of 911 sports cars, has made more than 13 billion euros from its bets on VW shares this year and last as it seeks to seize full control of Europe's biggest automaker.

The European automotive group said on Tuesday that earnings before tax rose to 7.3 billion euros in the six months to end-January, more than twice its revenue and far higher than the average pretax estimate of 3.65 billion from a Reuters Poll.

But Porsche preferred shares fell more than 6 percent -- worth in total less than half as much as its first-half earnings -- a decline which DZ Bank analyst Michael Punzet attributed in a research note to a weak balance sheet.

"Disappointing net debt (of 9 billion euros) could lead to some pressure in Porsche's and VW's share price today and will put some question marks on the whole takeover story," he said.

The hedging gains made during the first half surpassed the 6.83 billion Porsche earned from bets on a rise in the price of Volkswagen ordinary shares over the entire past fiscal year.

The results cemented Porsche's reputation as a black-box hedge fund with a captive auto business. Analysts had expected it to earn just 3.0 billion euros from derivatives speculation after 850 million in the year-earlier period. [ID:nLP270913]

Volkswagen's non-cash earnings contribution based on Porsche's capital stake fell 8 percent to 444 million euros, the Stuttgart-based group said.

"Porsche SE intends to further increase its share in Volkswagen. The company is therefore keeping all its options open. However, a precondition for any investment activity is that the economic conditions support it," it said.

UniCredit analyst Georg Stuerzer said Porsche's results remained "in need of explanation" but added that an indication for its hedging business was the 6.2 billion euros in cash paid during the first half to raise its VW voting stake by a further 20 percent -- an average price of just 103 euros.

Shares in VW fell 3 percent to 29.50 euros by 0802 GMT, while Porsche shares fell 6.2 percent to 34.75 euros.

Late in October, news that Porsche had secured access to about 74 percent of VW ordinary shares -- draining almost the entire free float -- led VW stock to quintuple within 48 hours to 1,000 euros per share, briefly making the Wolfsburg carmaker the most valuable company in the world.

Porsche then sold a small package of VW cash-settled call options to relieve buying pressure, sparking outcries from investors such as Deutsche Bank's (DBKGn.DE) German retail fund business DWS that the carmaker had manipulated the market and broken securities trading laws.

Although the German securities regulator Bafin began an official investigation, it said on Tuesday it found no evidence of any wrongdoing in the matter. Porsche, which in January raised its direct voting stake in VW to just over 50 percent, encountered problems last week rolling over a 10 billion euro credit line for the purchase and had to widen its pool of lenders to clinch enough commitments.

VW shares spiked after the loan was granted on speculation Porsche would move forward with its plan to gain a 75 percent voting stake in Volkswagen this year.

VW's home state of Lower Saxony holds another 20 percent and has opposed Porsche's aim to take full control of VW.