What is insider trading in relation to investing?

Answer 1

Insider trading is taking advantage of other traders by using non-public information.

There are a lot of different kinds of insider trading. The most traditional is a company officer who knows either that his company is about to have news that will push the stock up so he buys a bunch to sell after the price rises, or who knows her company is about to have news that will push it down so she sells her stock before the price drops.

There's another kind - front running. When a company's stock is purchased, the stock price goes up ever so slightly...maybe a cent per share...and stays there for a very short period of time. What a front-runner does is looks at a company's order flow and trades ahead of it. Most front-runners are stockbrokers, because you almost have to be to make this work. Let's say I wanted to front-run your million shares of Ford. I would get your trade ticket and enter two orders: yours for a million shares, and mine for a million shares...but I'd hit send on mine just barely before hitting it on yours. In a couple of seconds, the price of Ford stock will go up a penny, and then I would sell my million shares. This happened so fast that I didn't have time to pay for the stock, but I will get to keep the $10,000 profit I just made.

Answer 2

The illegal buying or selling of securities on the basis of information that is unavailable to the public.

It is illegal when the material information is still nonpublic trading while having special knowledge is unfair to other investors who don't have access to such knowledge. illegal insider trading therefore includes tipping others when you have any sort of nonpublic

Answer 3

Basically insider trading is having very early information about an event about to happen at a company that is invested in the stock market, Then using that information to your advantage to either presumably make big money or save what you have.

It is illegal to buy or sell a stock based on information not known to the general investing public. There are certain times corporate insiders - meaning a company's officers and directors, and any beneficial owners of more than ten percent can legally buy or sell their stock, but they must report these actions promptly to the SEC.

Answer 4

Let us say you are the managing director of ABC Bank Ltd which is a Stock Market listed company. After weeks of negotiation you know that ICICI bank the country's leading bank has accepted to buy your company and issues shares of its own company to investors who hold shares of your company. As any intelligent investor would know, shares of an ICICI Bank are much more valuable than shares of an ABC Bank. Once this news of ICICI acquiring ABC Bank goes public people will start accumulating shares of ABC Bank so that they can benefit out of the acquisition. This will send the price of ABC Bank skyrocketing. So, knowing this information, if you buy shares of ABC Bank for your personal share trading account before this news goes public, you can sell them off once the acquisition is complete and the share price has exploded. This way you gain an undue advantage and make a profit at the expense of the company.

This is insider trading.

Yes - it is a fraudulent Activity

Answer 5

The illegal buying or selling of securities on the basis of information that is unavailable to the public.

It is illegal when the material information is still nonpublic trading while having special knowledge is unfair to other investors who don't have access to such knowledge. illegal insider trading therefore includes tipping others when you have any sort of nonpublic

Answer 6

The illegal buying or selling of securities on the basis of information that is unavailable to the public.

Answer 7

Insider trading refers to trading in the securities of a company to take advantage of material "inside" information about the company that is not available to the public.