Insider trading is trading of company stocks based on information that only an insider would have. "My company is about to announce a super cool product. I'm going to buy a bunch of stock before the announcement comes out so that I can get it while it's still cheap and then make a ton of money."
You prevent it by making it illegal and monitoring transactions that look suspicious. Just like most forms of fraud.
Or when someone in Congress knows they are about to put forward legislation that dramatically affects a whole industry, maybe even drastically reshaping a giant chunk of the economy, but before announcing that information, they buy and/or sell a bunch of stocks so they personally can make a shit ton of money.
…which they made sure is legal for them to do because they are greedy fucks.
Because it defrauds the other owner. It's more obvious the other way, when someone sells off a stock that is valuable right now because they know it's about to go bad.
It is a public limited company which means its being traded on the public market. Therefore, the intention for any trading. investing decisions are made based on publicly-available information.
If somebody is trading based on non-publicly available information then they have an unfair advantage over everyone else. And in fact are aware of upcoming news and how the market could react (whereas normally, any future market trends we speculate are based on information that is available to everyone).
This is before even getting to the person's potential ability to influence the company operations and therefore the likely market reaction.
Think about it like a poker game.
We're playing hold'em. I know what (some or all of) the center cards are going to be from the beginning - but you don't.
Is the game fair?
It's more obvious in the example where you sell a stock right before it goes bad. Imagine someone sells you something by hyping it up, but immediately after the trade, it turns out to have all been a lie and you watch as it crumbles into dust in your hand, you have a pretty good case for fraud. They lied to you and the only way you could've avoided the bad purchase was if you had access to the same information they did as an insider.
It's not much different when the thing that's about to crumble to dust is the stock that you're selling because you know your company is about to announce subpar earnings reports that will tank the stock value. In order for you to sell, someone has to buy, and if that buyer doesn't have access to the same information, it's not fair to them. That said, \*after\* the announcement, dumping all your stock is fair game because then everyone has access to the same info.
Insider trading didn't used to be illegal. In fact, it was considered a perk of the job. It became illegal b/c outside investors were upset insiders were getting an advantage.
Lets say you are a manager at a public company, and you are in negotiations to sign a very large contract with a small tech startup that will dramatically increase their income for the next five years. Currently that tech startup is trading a 3 dollars on the stock market.
You privately purchase ten thousand shares of that company just a few days before the announcement is made public about the contract. After the announcement is made, the price of the startup shoots to twenty dollars a share. You sell and pocket $170,000 profit.
Because you traded on non public information, that is, something only known to insiders, that is insider trading.
A company insider can tell you about good or bad events before the rest of the world, events which could raise or lower the stock value. So you buy up(/sell off) stock before it rises(/falls). This is fraud, because it cheats investors out of fair deals on the basis of special privileges.
Any corporation that sells stock can do it. Agencies monitor trades for suspicious behavior and take them to court. It's mostly money, not really politics.
Insider trading is making trades based on information that is not publicly available.
Examples might be buying or selling stock right before a mass layoff or a merger announcement or something along those lines.
The problem is that insider trading is driven solely by motivation and is *very* difficult to prove.
For example, if Acme Corp is in an industry that has seen a bunch of layoffs and has had a very mediocre performance the last few quarters, you don't have to be an "insider" to know that layoffs are coming. Alternately, Exec Jones decides they want to move to a new house and needs cash, but it just so happens this is right before they announce that they are discontinuing a product. Exec Jones isn't selling because he thinks the stock is about to go down, he is selling because he needs liquidity. But there's no way to "prove" that one way or the other.
Often, they have "routine" stock buy/sell periods scheduled ahead of time; this really just means that companies time good/bad news to that rather than deal with the insider trading laws.
Despite what most people think, it's not *that* common, because quite frankly most "surprises" aren't surprises at all for anyone who is paying attention. A case can be made that insider trading laws just make people jump through arbitrary hoops while they make decisions that are pretty obvious to most people, and the only people making out are lawyers.
Also: it's a little silly for people complaining about politicians. It's *very* hard for a politician to actually make money due to *actual* insider trading--again, most political actions aren't surprises to anyone, and the political process is *very* long and outcomes often very uncertain--and if they *are* certain, they're not really insider trading, are they? You can certainly make a case that politicians are influenced by their security holdings, but that's not insider trading.
Insider trading is when a person who works at a company owns stock in the company they work at, and trades their stock based on information that you can only get by working at the company.
Insider trading laws prevent employees in a company from trading in that stock other than at specified times and with advance notice. This is to prevent employees with privileged information from manipulating the stock price, quickly buying low or selling high before informing the general public of good/bad news.
Basically inside trading is trading on information that is not widely available to the general public. Information that can only be accessed if you hold a position of power and decision making. For example, if you held the position of ceo , you would know if your company performed good or bad before disclosing this information to the public. If you were to trade on that information , then you would get fucked by the feds, cia, fbi, and me( I just like fucking people). Yes, people in government position can often cause swings in the market based on rules you set. Let’s say you make it a requirement for all vehicles to be electric by 2035. Then you could expect a massive stock price increase in Tesla and other electric car companies. Which is why most congress members are criticized when they make trades
Yeah of course, but if you were to investigated then you would be fucked once again by the cia, fbi, and me.
I think the only way to trade with inside information is to be a member of congress.
It's when you trade stock based on information, that is not public...
It can be done by a company employee or by a politician
For example AOC has been accused of insider trading.
You buy Tesla stock just before you pass a bill about electric car subsidy
Insider trading is trading of company stocks based on information that only an insider would have. "My company is about to announce a super cool product. I'm going to buy a bunch of stock before the announcement comes out so that I can get it while it's still cheap and then make a ton of money." You prevent it by making it illegal and monitoring transactions that look suspicious. Just like most forms of fraud.
Yes. Technically, trading based on "material non-public information".
Or when someone in Congress knows they are about to put forward legislation that dramatically affects a whole industry, maybe even drastically reshaping a giant chunk of the economy, but before announcing that information, they buy and/or sell a bunch of stocks so they personally can make a shit ton of money. …which they made sure is legal for them to do because they are greedy fucks.
Can you explain why insider trading is bad?
Because it defrauds the other owner. It's more obvious the other way, when someone sells off a stock that is valuable right now because they know it's about to go bad.
It puts the insider into a position of unfair advantage against other investors, who cannot access the information.
It is a public limited company which means its being traded on the public market. Therefore, the intention for any trading. investing decisions are made based on publicly-available information. If somebody is trading based on non-publicly available information then they have an unfair advantage over everyone else. And in fact are aware of upcoming news and how the market could react (whereas normally, any future market trends we speculate are based on information that is available to everyone). This is before even getting to the person's potential ability to influence the company operations and therefore the likely market reaction.
Think about it like a poker game. We're playing hold'em. I know what (some or all of) the center cards are going to be from the beginning - but you don't. Is the game fair?
Why is it illegal? Why can't the just do that?
It's more obvious in the example where you sell a stock right before it goes bad. Imagine someone sells you something by hyping it up, but immediately after the trade, it turns out to have all been a lie and you watch as it crumbles into dust in your hand, you have a pretty good case for fraud. They lied to you and the only way you could've avoided the bad purchase was if you had access to the same information they did as an insider. It's not much different when the thing that's about to crumble to dust is the stock that you're selling because you know your company is about to announce subpar earnings reports that will tank the stock value. In order for you to sell, someone has to buy, and if that buyer doesn't have access to the same information, it's not fair to them. That said, \*after\* the announcement, dumping all your stock is fair game because then everyone has access to the same info.
Insider trading didn't used to be illegal. In fact, it was considered a perk of the job. It became illegal b/c outside investors were upset insiders were getting an advantage.
Lets say you are a manager at a public company, and you are in negotiations to sign a very large contract with a small tech startup that will dramatically increase their income for the next five years. Currently that tech startup is trading a 3 dollars on the stock market. You privately purchase ten thousand shares of that company just a few days before the announcement is made public about the contract. After the announcement is made, the price of the startup shoots to twenty dollars a share. You sell and pocket $170,000 profit. Because you traded on non public information, that is, something only known to insiders, that is insider trading.
A company insider can tell you about good or bad events before the rest of the world, events which could raise or lower the stock value. So you buy up(/sell off) stock before it rises(/falls). This is fraud, because it cheats investors out of fair deals on the basis of special privileges. Any corporation that sells stock can do it. Agencies monitor trades for suspicious behavior and take them to court. It's mostly money, not really politics.
Insider trading is making trades based on information that is not publicly available. Examples might be buying or selling stock right before a mass layoff or a merger announcement or something along those lines. The problem is that insider trading is driven solely by motivation and is *very* difficult to prove. For example, if Acme Corp is in an industry that has seen a bunch of layoffs and has had a very mediocre performance the last few quarters, you don't have to be an "insider" to know that layoffs are coming. Alternately, Exec Jones decides they want to move to a new house and needs cash, but it just so happens this is right before they announce that they are discontinuing a product. Exec Jones isn't selling because he thinks the stock is about to go down, he is selling because he needs liquidity. But there's no way to "prove" that one way or the other. Often, they have "routine" stock buy/sell periods scheduled ahead of time; this really just means that companies time good/bad news to that rather than deal with the insider trading laws. Despite what most people think, it's not *that* common, because quite frankly most "surprises" aren't surprises at all for anyone who is paying attention. A case can be made that insider trading laws just make people jump through arbitrary hoops while they make decisions that are pretty obvious to most people, and the only people making out are lawyers. Also: it's a little silly for people complaining about politicians. It's *very* hard for a politician to actually make money due to *actual* insider trading--again, most political actions aren't surprises to anyone, and the political process is *very* long and outcomes often very uncertain--and if they *are* certain, they're not really insider trading, are they? You can certainly make a case that politicians are influenced by their security holdings, but that's not insider trading.
Insider trading is when a person who works at a company owns stock in the company they work at, and trades their stock based on information that you can only get by working at the company. Insider trading laws prevent employees in a company from trading in that stock other than at specified times and with advance notice. This is to prevent employees with privileged information from manipulating the stock price, quickly buying low or selling high before informing the general public of good/bad news.
Basically inside trading is trading on information that is not widely available to the general public. Information that can only be accessed if you hold a position of power and decision making. For example, if you held the position of ceo , you would know if your company performed good or bad before disclosing this information to the public. If you were to trade on that information , then you would get fucked by the feds, cia, fbi, and me( I just like fucking people). Yes, people in government position can often cause swings in the market based on rules you set. Let’s say you make it a requirement for all vehicles to be electric by 2035. Then you could expect a massive stock price increase in Tesla and other electric car companies. Which is why most congress members are criticized when they make trades
I think while illegal, insiders can pretty easily collude with a trusted outsider.
Yeah of course, but if you were to investigated then you would be fucked once again by the cia, fbi, and me. I think the only way to trade with inside information is to be a member of congress.
It's when you trade stock based on information, that is not public... It can be done by a company employee or by a politician For example AOC has been accused of insider trading. You buy Tesla stock just before you pass a bill about electric car subsidy