Reports of insider trading occasionally hit the news as the Securities and Exchange Commission prosecutes illegal trading activities. However, such trading is not illegal if reported as required by the SEC and is not based upon material non-public information. Many investors seek to gain profits in trading stocks by following reports of insider trading. Legal trading by insiders is the buying or selling of company stock by individuals with a greater than ten percent share of a company?s assets or by corporate officers, directors, or other key employees. Illegal insider trading happens when an insider uses non-public information gained during his work activities to trade stocks in breach of his duties to the company and its shareholders. To access information about trading by insiders an investor can access the E-D-G-A-R database of the Securities and Exchange Commission at sec.gov edgar searchedgar company search .html. For example a trader trading CITI can go to this web address and enter ?CITI? to find information about Citi Group filings.
Is following insider trading profitable? Many think so. Although legal insider trading does not take advantage of privileged information the general consensus is that company insiders have a deeper insight into the prospects of a company?s products, sales, finances, other hard assets, and forward looking cash flow in general than do other investors. An issue is often timing stock trades . A company insider must comply with SEC regulations and report his purchase or sale of company stock within a few days. In today?s fast moving markets SEC insider trading reports are, in fact, yesterday?s news. However, so are financial reports, the day after they are issued. If one is interested in long term investing it can be a useful to know that a company?s principals are all buying stock, converting stock options, or selling stocks. If insiders are accumulating stocks they likely believe in the future of the company. If insiders are all selling stock they apparently believe that the stock price will fall. Part of learning how to day trade , includes knowing about insider trading in the stocks that one trades. This is part of fundamental analysis of stocks.
Technical analysis of stocks deals with market reaction to fundamentals, including reports of legal or illegal insider trading. Knowing the fundamentals gives the trader insight into the general range in which a stock might trade. However, it is with the use of technical analysis software when trading stocks online that the trader typically can follow the market results of insider trading reports. Insider trading does not necessarily mean anything about a stock?s prospects. For example, a company CEO may have risen through the ranks and received stock options along the way. He may find one day that virtually of his assets are tied up on his company?s stock. When he needs to pay for his child?s college education, buy a retirement home, or pay for medical bills his only source of cash may be his company stock. He may have more insight than others as to when to sell stock but any given stock sale may have more to do with his private life than with anything about the company itself.
Be The First To Comment
Related Post
Please Leave Your Comments Below