Profiting from gLegal Insider Trading

For free insider trading reports and a free video course further explaining this material visit www InsidersLab commaterial visit www.InsidersLab.com

What Insider Trading is and Why It Should Matter to YouWhile everyone may argue about winning stock techniques, there is one thing that virtually everyone can agree on; those investors with the best information usually investors with the best information usually win.

That said, those with the best information on any given company are the corporate insiders managing staff and making decisions for that company on a day todecisions for that company on a day-to-day basis.

They are obviously privy to information that the rest of us will never havethat the rest of us will never have.

Of course, this gives them an unfair advantage over the average investor when the insiders are buying and selling their own company shares so the SEC has them own company shares so the SEC has them adhere to a strict set of rules. Among other restrictions insiders are limited to other restrictions, insiders are limited to certain trading windows and they must report all of their trades to the SEC in a ptimely fashion.

As we’ll soon see, this is all good news for the average investor because these insider trades are all made publicly available. Insiders may not be able to tell you Insiders may not be able to tell you exactly when and how much of their company’s stock to buy or sell but their company s stock to buy or sell but their actions speak volumes.We call these trading signals and we’ll be We call these trading signals and we ll be covering a few of these in this tutorial. Let’s jump right in shall we?

Look for Open Market TransactionsMost individuals buy and sell their stocks in the open market. They find the bid and asked price for the shares and execute their trades - all in the open market. But insiders have a number of other methods insiders have a number of other methods for acquiring or disposing of stock shares.

These methods may include private placement and/or exercise of stock options.

Often these alternative methods allow i id t b h b l t il i insiders to buy shares below retail prices or without having to pay any commissionscommissions.

Therefore, when insiders do decide to buy their company’s shares in the open market they have to make the same risk vs. reward calculations individual investors reward calculations individual investors do. They must also figure in the trading costs of paying commissions and buying costs of paying commissions and buying at their stock’s asking price. A decision to buy shares on the open market regardless y p gof the risk and with the associated costs is a much stronger trade signal to us.

Option-Related Insider TradesWhen an insider does exercise his options he sometimes exercises and sells several lots within a time frame. One of the reasons for doing this might be a shortage of cash to exercise all of his options at of cash to exercise all of his options at once.

For example, if shares are trading on the open market for $15 and our insider has options to buy 20,000 shares at $10 he has the potential to make $100 000 has the potential to make $100,000 immediately.

However, to do so would mean paying $200 000 up-front and he may or may not $200,000 up-front and he may or may not have that much available cash.

In this case, he may choose to buy 5,000 shares at a time and use the profit to buy more shares. He would keep doing so until all options have been cashed inall options have been cashed in.Many may have viewed this piecemeal style of purchasing as a negative indicator style of purchasing as a negative indicator of the stock’s future prospects when in fact it wasn’t.fact it wasn t.In our next session we’ll be covering the differences in interpreting insider p gpurchasing versus insider sales.

Insiders Buying vs. Selling SharesWelcome to the third instalment of Insider’s Lab insider trading tutorials. Today we’ll be discussing the significance of insiders buying stock versus insiders selling their sharesselling their shares.

There are many reasons why an insider would sell their shares. They may need cash for a new home or pay for their kids’ tuition Or they may just want to diversify tuition. Or they may just want to diversify their investments. However, there is only one reason for an insider to buy stockone reason for an insider to buy stock.They think that the price will rise. Makes sense right?sense right?

On the other hand, a major flag for identifying stocks to avoid and possibly consider selling short, would be insiders selling their shares after the price has selling their shares after the price has dropped substantially.

This is a strong negative signal.

Differences in Holding PercentagesWelcome to the fourth segment of the Insiders Trading course by InsidersLab.com. Today we’ll be discussing the importance of looking for big trades and checking for changes in big trades and checking for changes in insiders’ holding percentages.

Obviously the more money insiders are trading the more significant the transaction. When researching a company it is a good idea to start your research it is a good idea to start your research with the larger transaction values first. Most insiders are not chairmen with multi-Most insiders are not chairmen with multimillion-dollar bonuses.

The average vice president and chief financial officer at a company may make a comfortable living but a $10,000 trade is still serious money to many of them still serious money to many of them.

Th t ti l l k ll The transaction value may look small beside all the others you see on a given day but it doesn’t mean it isn’t significantday but it doesn t mean it isn t significant.

Likewise a 5,000 share trade that doubles a vice-president’s shareholder percentage is more significant than a 5,000 share trade made by a chairman with millions of trade made by a chairman with millions of shares. The 5,000 shares may represent a good deal of the vice-president’s net good deal of the vice president s net worth.

Hands-On Insider Trades Welcome back to the InsidersLab.com Insiders trading training course. Today we’ll be discussing the significance of trading done by “hands-on” insiders.

As a rule, it is more beneficial to focus on transactions by insiders with a hands-on role in the company. Trades by the chairman, president or chief executive officer, vice president, chief financial officer or any C Level officer financial officer or any C-Level officer should be given priority. They have the most proprietary knowledge and often most proprietary knowledge and often have more personally at stake in the trades they make.

Though directors generally lack day-to-day responsibility their transactions should not be completely ignored. They also have access to information about the company’s access to information about the company’s financial condition and strategy. Maybe not to the degree as their hands-on not to the degree as their hands on colleagues but definitely more than the average retail investors.gIn our next segment we’ll be covering Long-time insiders and looking for direct ownership.

Long-Term Insiders and Direct OwnershipWelcome to another segment of the InsidersLab.com insider training tutorial series. Today we’ll be covering the importance of following long time insiders importance of following long-time insiders and looking for direct ownership.

It is important to know the trading history of an insider when judging the relative significance of any insider trading signals. This rule applies particularly to new This rule applies particularly to new directors and C-Level officers. Insiders with long trading history are more with long trading history are more significant than insiders will short trading history within a company. y p y

If you can, try to find out when an insider became an insider and grab hold of an insider’s history that has at least a few years of data years of data.

A th f l ti i t l k f di t Another useful tip is to look for direct ownership. Direct ownership means that the shares are actually registered under the shares are actually registered under the insider’s name.

Generally speaking, insider trades of direct holdings are more significant than indirect ones. It makes sense that individuals are more likely to practice individuals are more likely to practice more discretion when the results affect their pocketbooks directly their pocketbooks directly.

Look for Group TradesHello and welcome to another instalment of the InsidersLab.com Insider Trading course. Today we’ll be covering the topic of group trades.

It is always more significant to see a group of insiders trading within a short period of time. Insiders are only human and believe it or not they can be and – believe it or not - they can be wrong. So any activity indicating where there is a consensus among a few insiders there is a consensus among a few insiders should be considered a strong signal. It is logical to assume that the odds of two, g ,three, four, or more insiders being wrong are much less than the odds with just a i l i idsingle insider.

That’s it for this segment. It was a short one but important. By the way, if you’re enjoying our information be sure to head on over to InsidersLab com and sign up on over to InsidersLab.com and sign up for a 14 day trial of our services. For less than fifteen cents per day you can For less than fifteen cents per day you can see exactly what is happening on the inside. You’ll also gain full access to our inside. You ll also gain full access to our suite of research tools so you may better assess this valuable information.

Summary and Next StepsObviously, there is a great deal more to making good investment decisions by monitoring insider trading activity than what we’ve covered here. H h th t th However, we hope that you can see the potential of leveraging such data when making your own buying or selling making your own buying or selling decisions.

For free insider trading reports or to try our premium services for only $1.95 please visit InsidersLab.com. Thanks and we’ll see you on the ‘Inside’ Looking for we’ll see you on the ‘Inside’. Looking for good stocks?

Happy Trading!!!Eric HaaranenEric Haaranen

Director of MarketingI id L bInsidersLab.com

P.S. A great deal of the content on our site is available for syndication. If you have a website that caters to investors or investment advisors our unique content investment advisors our unique content could give you a distinct competitive advantage advantage.

Contact us for further informationContact us for further information.