Effects of Insider Trading on Stocks

Making sense of insider trading as an investor

February 2022

Effects of Insider Trading on Stocks in 2022 – In this article we’re going to answer you questions about the Effects of Insider Trading on Stocks. When is insider trading legal? How can you profit from legal insider trading? What does the SEC, Security Exchange Commission tell us is necessary to comply with it’s rules on insider Trading? Well, here is the information you need to know.

No one can deny that insider trading in the stock market can be illegal, and there are severe penalties for perpetrators. If you are found guilty of trading in the stock market using insider information, you could end up behind bars and face the full force of the law. However, what most people don’t know is that The Securities and Exchange Commission (SEC) has a requirement where every insider needs to disclose their trades, and they must be reported in financial papers, then insider trading can be LEGAL.

NOTE: SEE the SEC (Securities and Exchange Commission) has to say about Insider Trading Rules here.

Investors can then use this information to find clues about various companies and decide which trades they want to make. The simple act of insider trading in the stock market is enough to land you in trouble because using information that isn’t accessible to the other party is a criminal act. There is a lot said about the impact insider trading has on the stock market.

NOTE: SEE what’s needed for trades to be LEGAL for Inside Traders and what notifications they must make from the SEC.

What are the Effects of Insider Trading on Stocks and the Stock Market?

It is said to derail confidence in the market and to hurt the stock market in general. However, the stock market can’t get hurt because it isn’t a physical entity. You can’t claim that the market has been a victim of insider trading because it won’t be true. You could say that insider trading affected the price of stocks in the market and hurt the traders who were engaged in the buying and selling of that stock.

The stock market witnesses various trades being made every day, and some of them are bound to be made based on insider information. Verifying trades that have relied on insider information can be difficult because you can’t know that information wasn’t public knowledge beforehand. The price of stocks is generated by supply and demand, so you can’t blame it on insider information.

How Do the Effects of Insider Trading on Stocks Hurt Investors and the Stock Market?

However, one thing that you can blame illegal insider trading is that it decreases the value of trades made in the stock market. If an investor uses insider information to make trades and profits from them, it will create an unfair advantage. The imbalance will result in the market favoring them over others, which can’t be allowed to stand.

Therefore, it makes sense that insider trading is regulated when trading on the stock market. No individual who has prior knowledge about a company can trade in their stock and gain an advantage over others. That will create a level playing field and ensure that stock market trades are free from any controversy. That is easier said than done, but in the general scheme of things, it is a necessary act that will help keep the playing field level for all traders.

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About the Author:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY SUCCESSFUL, PROFITABLE Traders, Investors, and Institutions:

LEGAL Insider Trading (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks / Share Repurchases by Public Corporations (ie. Apple, Tesla, Netflix, Facebook, Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

5 Ways to Prevent Insider Trading in Your Company

5 Ways to Prevent Insider Trading in Your Company

There are 5 ways to prevent insider trading in your company, that if followed, can save your company from damage to it’s reputation, lawsuits, and civil or criminal liability and penalties. Recently, there has been plenty of attention given to insider trading, and it has generated a lot of publicity for people who have been guilty of insider trading. No company wants its executives to be accused of insider trading and using non-public information to benefit and enrich themselves. However, the biggest risk that companies are facing today is not malicious intent, or greed, but corporate negligence. So, learn these tips to keep your business safe.

5 Ways to Prevent Insider Trading in Your Company

Most companies can easily prevent insider trading from occurring in the first place if they employ a stable system of checks and balances. These measures will prevent insider trading from happening, and the company won’t face allegations of criminal activity. Therefore, we will share the five best ways to prevent insider trading in your company. Here is what you need to do.

1. Practice Risk-Free Trading

One of the best ways to prevent insider trading in your company is to practice risk-free trading. You can place restrictions on insiders not to trade when the company’s quarterly earnings report is about to be released. It will reduce all instances of insider trading occurring and won’t see insiders placing risky trades. You can also create a list of stocks in which your employees can’t trade at all, which will ensure that your company has nothing to do with insider trading.

2. Keep an Eye on All Insider Trades

You should look at all trades being made by company insiders so that you can determine whether there has been a trade made using insider information. Observing these trades will allow you to manage all trades and keep a check on their employees. You can even employ a third party to check trades made by your corporate insiders to ensure they follow the rules and don’t make trades based on insider information.

3. Educate Your Employees on the 5 Ways to Prevent Insider Trading in Your Company

It is easy to commit insider trading when you are not aware of the threats and risks. You can diffuse the situation by educating your employees about insider trading and the penalties they stand to suffer. Implement a training program to teach employees how to avoid insider trades and what to do if they come across someone guilty of insider trading.

4. Investigate Insider Trading Quickly

Don’t waste time if you find someone guilty of insider trading. You need to take action yourself before an outside party threatens you with legal action. When you have your house in order and know about insider trading in your company, you can act fast to take action against the culprits. That will also send a strong message out to others that the company won’t tolerate insider trading.

5. Use Technology to Limit Insider Trading

You can also use technology to help limit insider trading in your company. There is plenty of software around to alert you if someone from your company is making insider trades. That will protect your company from insider trades and damaging lawsuits that arise from insider trading activity. Insider Trading Management Systems (ITMS) are designed to help companies notice insider trading and prevent it from occurring in the company.

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About the Author:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY SUCCESSFUL, PROFITABLE Traders, Investors, and Institutions:

LEGAL Insider Trading (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks / Share Repurchases by Public Corporations (ie. Apple, Tesla, Netflix, Facebook, Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

5 Types of Insider Threats in Financial Organizations

Financial Organizations and the insider threats they face

5 Types of Insider Threats in Financial Organizations – All organizations face the threat of cyber-attacks equally, but financial organizations are the ones that are most vulnerable to cybersecurity threats. The main concern for these organizations is the level of risk they face from insiders in the company. Both internal and external factors may cause security breaches, but insider threats prove to be the most damaging to financial organizations.

5 Types of Insider Threats in Financial Organizations

This article will cover the five types of insider threats that financial organizations may face, along with measures they can take to protect themselves from major security breaches and cyber-attacks. The main motivator for insiders is financial gain or a way to take revenge from the corporation. Whatever the reason, financial organizations must have measures to deal with insider threats and protect their clients and their reputation.

1. Careless Workers

These insiders don’t have malicious intent but tend to pose a risk to financial organizations through their actions. They may inexplicably share valuable information with their friends and family, which puts them in an advantageous position to trade in the market. These individuals may break security protocols without knowing or installing applications unapproved by the business. Their actions can put the entire organization at risk of insider trading or cyber-attacks.

2. Insider Agent

These individuals work for a third party and can be part-time or full-time employees. Their motivation is to acquire trade secrets or valuable software or technology from the organization and use that for their benefit. You can stop these insider agents by implementing a system to monitor all activity and restrict access to critical files for authorized personnel only.

3. Third-Party Services

When financial organizations work with third-party services, they risk exposing their valuable technology and information. An individual or a third-party service with the proper motivation can steal that information and use it for their gain. The best way to deal with this threat is to implement a proper system where everything is monitored and any suspicious activity is stopped in its tracks.

4. Disgruntled Employees

These insiders are the most dangerous individuals because they think they have nothing to lose. They may feel let down by the organization and want to exact revenge on the company by stealing valuable information or technology and sharing it with their competitors. They are motivated to work against the company’s best interests and may do serious harm to the financial organization.

5. Malicious Insiders

These insiders are in positions of power and want to use sensitive data and valuable information for their gain. They have access to all the company’s documents and financial reports and can use them to make trades for their benefit in the market. These individuals are the hardest to track for financial organizations since they are generally the company’s most senior officials.

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About the Author:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY SUCCESSFUL, PROFITABLE Traders, Investors, and Institutions:

LEGAL Insider Trading (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks / Share Repurchases by Public Corporations (ie. Apple, Tesla, Netflix, Facebook, Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

Tips for Using Insider Data

How to take advantage of insider trading information

UPDATED: March 2022

Tips for Using Insider Data – You can make smart investment decisions by looking at insider trading data and using it effectively when making your trades. When you look at insiders making trades, you can easily predict the future performance of the stock. That will give you an advantage over others in the stock market, but making sense of insider data isn’t easy. You must be willing to read between the lines and be smart with your investments if you want to profit from insider trading information.

Tips for Using Insider Data

You must also consider that not all insider trades are equal, as there may be different reasons why insiders are trading stock. You need to differentiate between the trades and put yourself in the shoes of insiders to take advantage of their trades. We will share some tips on how you can do that and use insider trading data to your benefit. Here is what you must focus on.

1. Look at Purchases Instead of Sales

Even though insider sales and insider purchases offer investors valuable insights, research has indicated that insider purchases offer more reliable signals for trades. You can easily interpret insider purchases because if an insider is spending money on a stock, they are confident about the stock’s future performance, expecting its price to increase.

Insiders won’t take risks with their money if they expect stock prices to fall. If they are investing in a stock, they know it will perform well in the market.

2. Look at Trades from Top Executives

If the top executives in a corporation are making trades, you can get excellent insider trading signals from their trades. They have access to all the financial information about the company and will know which stocks will generate great returns on investment.

Therefore, you must follow the trades made by insiders who hold key positions in their company, as they are more likely to make successful trades.

3. Pay Attention to Large Transactions

When you analyze trades made by insiders, you must focus your attention on the size of the transaction. When insiders are confident about a company’s prospects, they will commit more money to the trade. If insiders think that a stock will perform poorly, they will sell it off in large numbers to not suffer a big financial hit.

The size of the transaction, where it is selling or buying stocks, is what will determine the type of trade that is taking place. You can make sense of insider trading data by looking at how confident insiders are at making money from their trades.

Conclusion of: Tips for Using Insider Data

Making sense of insider data isn’t easy. However, knowing the trading signals and motivation of insiders, you can make trades that are beneficial to you. Use the tips we have shared and use insider data to your advantage.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our Articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

How to Track Insider Trading

The best ways to track insider trading in your company

UPDATED: March 2022

How to Track Insider Trading – Tracking insider trading isn’t too difficult, even though it may seem impossible to the inexperienced trader. The good news is that stock trading is regulated and must abide by the rules and regulations of disclosure. Hence, all you need is a good internet connection, and you can access all information on insider trading activity online. All insiders who are buying or selling stock have to file reports documenting their trades in the market with the Securities and Exchange Commission (SEC).

How to Track Insider Trading

This measure ensures that their trading activity and all their documents become public knowledge, and anyone can access these documents to track insider trading. The documents can be viewed on the website of the SEC or by visiting a regional office of the SEC. All you need to do is click on the section titled “Search for Company Filings,” and you will find all the information you need on any company’s insider trades.

Among the most valuable documents on how to track insider trading are Form 3, Form 4, Form 5, and Form 144. All these forms provide you with different information regarding the reasons for the trades and the positions of the insiders making those trades. Here is what each form represents:

* Form 3

All insiders must provide an initial statement, and that will be found on this form. Insiders have ten days after they have obtained insider status to file Form 3. The document must be filed even if the insider hasn’t made any trades in the market. The report is necessary for establishing the status of the insider.

* Form 4

You can view insiders’ activity through Form 4, which will show you a change in the insider’s position as a stockholder. You can learn about how many shares have been bought and sold by that person and other relevant changes to the trade. Any insider activity that has been made in a month has to be reported on this document before the 10th of the following month.

* Form 5

Any insider trading activity that is small and insignificant must be reported on this document. Such activity includes internal stock transfers and small stock purchases that don’t need to be reported on Form 4.

* Form 144

When the insider wants to sell restricted stock, which would be stock that the company has awarded them for employment or as compensation. The document acts as a public declaration and informs others about the stock position of the insider. All insiders are restricted from selling their stock for one year. Once insiders decide to sell their stock, they need to file Form 144 and have up to 90 days to sell it. The form must be filed before the date of sale for the stock. Once the sale has been completed, the insider will need to file their Form 4.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our Articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

Addressing the Challenge of Insider Risk

How to decrease the risks of insider trading in your company

UPDATED: March 2022

Addressing the Challenge of Insider Risk – Even though cybercrime continues to rise, one of the most dangerous threats that companies face today is insider trading. No company wants to be caught red-handed in facilitating insiders to take advantage of nonpublic information to profit.

Addressing the Challenge of Insider Risk

The penalties of insider trading are significant and deter most people from engaging in this illegal activity. Still, the greed for more money often causes insiders to take risks they would rather not take.

Therefore, it is up to the company to ensure that they keep an eye on their insiders and watch their trades to check if they aren’t making insider trades. That is hard to do in large organizations, and that is the reason so many companies are focusing all their efforts on addressing the challenge of insider risk. To compound matters, there are different types of insiders that the company should be aware of. These include the following:

* Malicious Insiders

These are insiders who don’t care about the company’s reputation or about the financial penalties they would be charged with if found guilty. Their motivation is to make money quickly, and they will go to great lengths to get any advantage they can.

* Negligent Insiders

These are insiders who aren’t trying to do something illegal, but their incompetence or failure to follow protocol end up engaging in insider trading. Most companies are wary of negligent insider trading because it can be challenging to prove that the insider didn’t know they were doing something illegal.

* Careless Insiders

These insiders have made a careless mistake that has resulted in insider trading and serious harm to the company. They aren’t motivated by making more money but ended up using the wrong information to make their trades.

Determining the Risk of Insider Trading

Almost every company is taking the threat of insider trading seriously because they can face serious penalties and loss of reputation in the industry. No one wants to be charged with insider trading, and therefore, they are coming down hard on individuals guilty of this activity. The best way of addressing the challenge of insider risk is to train and educate your employees about what constitutes illegal insider trading.

There is also legal insider trading, but there is a fine line that individuals must not cross at any point. As a corporation, you must implement a system that checks all trades and ensures that insiders are not trying to access nonpublic information to benefit and profit in the stock market. Once they are guilty of insider trading, it can be extremely difficult to prove their innocence, which is why it is best to avoid all instances of insider trading.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our Articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

What Is a Blackout Period?

Explaining what happens during a blackout period in insider trading

UPDATED: March 2022

What Is a Blackout Period? – There are specific rules and restrictions imposed on public company executives and insiders when buying and selling company shares. That prevents them from illegally benefiting from insider information and gaining the upper hand over other investors in the stock market. Publicly traded companies may also choose to implement a blackout period during which company executives and employees will be restricted from buying or selling company shares.

What Is a Blackout Period?

A blackout period it the time when a publicly traded company’s directors, officers, and certain employees (insiders) can’t trade the company’s stock. Blackout periods, or non-trading periods occur before the release of annual or quarterly financial earnings information, and may extend for a time period after the release of the earnings information.

Who Sets the Blackout Period?

Most Investors don’t know that it is the publicly traded company, not the SEC (Securities and Exchange Commission), that sets the blackout period. However, the SEC’s Rule 10b5‑1 of the SEC Act of 1934, creates exceptions, or basically a “safe harbor” in which the various officers, directors, and some employees of the business, by establishing a trading plan, may trade a company’s securities even during a blackout period, and even when they have inside knowledge of material nonpublic information. Because of the various exceptions, that is why it is so important to know what is a blackout period?

A trading plan might be an established employee stock ownership program that calls for a set number of shares of the company to be purchased each month. In general, a trading plan removes discretion for the sale or purchase of stock from the individual and creates an automatic program.

Most of the time, a blackout period is implemented before a quarterly earnings report or before earnings announcements. That ensures insiders who have access to nonpublic information can’t trade illegally in the stock market. The blackout period can be imposed on only the company’s top executives or on all company employees.

What is the Purpose of a Blackout Period?

The blackout period’s main purpose is to prevent illegal insider trading, so that people with access to nonpublic information in the company can’t use that information to profit or prevent loss in the stock market. Corporations aren’t legally obligated to impose blackout periods, but many corporations still choose to implement them to limit illegal trading activities.

Most companies choose to impose recurring blackout periods whenever they are about to release an earnings report. The blackout period would start from the last day of the financial quarter and last until two or three days after the company files their financial results. That ensures the public has enough time to study the financial results and then make investments decisions. In essence, Blackout periods level the playing field for investors and ensure that no illegal trading activity occurs.

What Are the Penalties of Trading During Blackout Periods?

The company can take strict action against any individual who is found guilty of trading during blackout periods. They could choose to let the employee or executive go and may even place a fine on them in many cases. Most companies have removed directors from their post and levied pay cuts for trading shares during a blackout period. Suppose you have access to nonpublic information and willingly choose to use it for your benefit. In that case, you can be subjected to criminal penalties, including a fine and even jail time.

Therefore, you must understand the rules surrounding blackout periods and refrain from trading within that period. Employees and executives who choose to ignore blackout periods and continue trading will only be creating more problems for themselves in the future. That is why all executives and employees must understand what is a blackout period so that they don’t become a victim of illegal insider trading.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our Articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

What Investors Can Learn from Insider Trading

Making the most of insider trading as an investor

UPDATED: March 2022

What Investors Can Learn from Insider Trading – When investors are studying the market, making sense of insider trading activity can be one of the hardest challenges they face. After all, they must look at the market dynamics and then figure out whether insiders are making moves based on the rise and fall of share prices.

What Investors Can Learn from Insider Trading

Even though corporate insiders may be engaging in insider trading, it doesn’t mean that insiders have it easy when trying to figure out what financial investments to make in the market.

To make things simpler, we will share what insider trading is, how can an investor learn from insider trading, and what is the best use of insider trading data. So, let’s begin: 

What Is Insider Trading?

The first thing you should know about is that there is illegal insider trading, and then, there is legal insider trading. As an investor, you must first understand the difference between the two to profit more from them. Illegal insider trading occurs when insiders buy and sell shares using nonpublic information. That means insiders are trying to gain an unfair advantage over other investors by using crucial financial information about their company.

Therefore, anyone who is trying to access nonpublic information to use it for their benefit when making trades in the financial market is complicit in illegal insider trading. Some examples of insider trading include the following:

  • The company CEO sells their stock after learning that the company suffered massive losses.
  • The top executives of the company also sell their stock after learning about the heavy financial losses the company suffered during the last quarter
  • Employees sell their shares after learning in the financial report meeting that the company will not post a profit this quarter.

Anyone found guilty of illegal insider trading could face heavy fines and even jail time. The Securities and Exchange Commission (SEC) regulates insider trading and keeps a close watch on anyone involved in insider trading on the financial market.

Insider Trading Isn’t Always Illegal

There are certain times when insider trading isn’t illegal, and this happens when the top executives and insiders in the company are involved in trades that aren’t based on insider information. Most of the time, insiders tend to make trades to raise personal capital. An employee of the company may sell all of their shares because they want to raise capital to purchase a new house or a boat. Also, some corporate executives are given compensation in stock by the company.

That is the reason why you may notice that a top executive of the company has suddenly bought a large number of shares in the company. That doesn’t mean the share prices will rise in the coming months but is generally the executive solidifying their compensation. There is a thin line between legal and illegal insider trading, which shouldn’t be crossed.

Investors looking to learn from insider trading should base their financial decisions on various factors instead of relying solely on insider information.

Conclusion to What Investors Can Learn from Insider Trading

Insider trading has been around for a long time, and you must look at all the factors when making investment decisions as an investor. Even though insider information is important to look at, major corporations have hundreds of insiders, and trying to figure out a pattern may prove to be a difficult proposition for investors.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our Articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

Insider Trading Is of More Than One Kind. Here’s Why.

Making sense of insider trading as an investor

UPDATED: March 2022

Insider Trading Is of More Than One Kind Here’s Why. – Using trading plans and stock for compensation for buying and selling shares is a common practice among insiders for major corporations. You shouldn’t automatically see all insider trading activity as actionable because the reasons for their trading activity could be different and driven by their motivation rather than any significant change in market conditions.

Insider Trading Is of More Than One Kind Here’s Why.

Most people assume that when insiders and management are making trades, it means something big will be happening regarding that company’s stock price. However, all trading activity is not driven by the same motivation, and hence, should be understood on its own terms. Similarly, an insider’s shares can’t be observed the same way as the stock you hold.

So, if you’re looking at insider trading activity and trying to make sense of it all, know that all of it not of the same kind. Here’s why.

1. Stock Is Used as Compensation

Most times, a corporation will reward its senior management by offering them stock as compensation for their income payments. Therefore, when you notice a significant number of stocks being bought by a senior official in a company, it could be that the corporation is rewarding them. You can’t assume that something big is happening in the company.

When senior management decides to purchase stock in their company, it doesn’t mean that stock price will rise significantly in the coming weeks and months. However, it does point to the fact that they think the stock is undervalued at this moment in time. Conducting a little analysis of the company will give you a better idea of exactly where the stock price stands concerning the market.

2. The Use of Trading Plans to Sell Shares

Insider trading informed by private knowledge is limited by SEC’s Rule 10b5. That ensures insiders don’t gain any advantage against individuals without this knowledge. Insiders can’t sell shares before any negative news comes to light, and they can’t buy shares cheaply before any news breaks that significantly raises the price of the shares. So what do insiders do in that scenario?

They use trading plans, allowing employees to trade their company’s stocks while removing insider activity from the scenario. Trading plans have a simple function:

  • They are put in motion ahead of time and must be enforced before insider information leaking to the public.

Recognizing trading plans is relatively simple and gives you the knowledge you need to make fair trades without relying too much on insider trading activity.

Conclusion of Insider Trading Is of More Than One Kind Here’s Why.

When looking at insider trading activity, the one thing that you can’t do is to project and assume regarding the performance of a company’s stock. You can’t read too much into insiders’ actions as that won’t help you make better investment decisions. You can’t take action based on someone else’s decision to buy or sell stock in the corporation. Insiders have their motivations for buying and selling stock, and you must look at all the factors before deciding to act on insider trading information.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our Articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

Does Insider Selling Mean It’s Time to Sell?

How to make sense of insider selling and deciding when to cash in

UPDATED: March 2022

Does Insider Selling Mean Its Time to Sell? – When you’re looking at insider trading activity, there is no denying that you should look at actions instead of relying on words. You must still base your decision on a rationale. Business leaders will be happy to share why they think you should buy their stock, but insiders’ actions will reveal a whole different story behind whether investing in their stock is a good decision.

Does Insider Selling Mean Its Time to Sell?

You can learn a lot by looking at insider selling activity to find out whether the value of a stock will rise or fall, but it isn’t a perfect method. You can’t rely solely on this insider information because insiders can be wrong at times as well. We will look at whether insider selling means it is time you should sell your stock as well.

What Is Insider Selling?

Even though trading by company insiders can be seen as illegal insider trading in some instances, most selling and buying by company insiders is legal. If the trades aren’t based on non-public and material information, insiders and corporate executives can sell and buy shares whenever they like. Even though buying and selling shares are legal, insiders must follow specific rules to ensure that they are trading within legal boundaries. That’s why public company executives and board members must report it publicly whenever they buy and sell company shares.

There are several reasons why corporate insiders and executives may choose to buy or sell shares in their company. They may think the company is heading towards greener pastures and want to maximize the profit from their stock investments. They may have been awarded shares with their compensation package and are selling their shares to diversify their investments or purchase a new house or private island.

What Does Insider Selling Mean?

It’s not a red flag if you notice one company executive selling a large number of shares while others are holding on to their shares. However, if there is a pattern of company executives dumping their shares in large numbers, it could point to a drop in the share price in the future. However, it is all speculation at this stage, and you should look at other factors as well. If there is no notable reason for insider selling activity, it is a good signal that you may choose to sell your shares in the company as well.

What you must do is look for patterns of insider selling activity. You should also consider the company’s fundamentals when choosing to sell shares. Take the most recent news about the company into consideration, the projections for its future operations, and analyst estimates before deciding to sell shares. You should only trade shares when you have complete information regarding insider trading trends and selling activity.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our Articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .