Question for All?

[Wildbill]

Actually my understanding is that you can personally trade at anytime as long as you haven't agreed in contractual terms to limit your trading to windows, which is usually required of top officers only. What would make it insider trading is if I called up someone else and told them what I know and they went out and traded on that specific information. At my company there must be 100 people at least that know the earnings that we will report days in advance, people that I doubt have any restrictions on trading. Some companies make you give them access to your trading accounts and could reprimand you for making obvious trades, but for the most part I don't think there is any crime in doing this as long as you do it yourself and don't get others involved. That would be a violation of confidentiality agreements anyways so that in itself would be highly unethical, if not illegal.

I am telling you that it certainly happens and there is almost no way to enforce it. Just look at the charts for 3 or 4 days before earnings release at some of the blowout numbers given. I bet 95% or more will show some pretty confident looking buys. If the SEC were to investigate some of the buyers, they would simply say "hey I know earnings were coming and the price action told me to expect something good so I bought". Its almost impossible to clearly tie someone to insider trading without clear and unmistakable evidence that someone revealed something to them. Same goes for things like FDA trials. Now being ethical is a different story, but for criminal issues I think things are a lot looser than you presume. Of course I don't have any legal standing about this so don't take this as legal advice, just my personal understanding. And this is the case at every company I have ever worked at with publicly traded shares.

[Wildbill]

I thought about this overnight and here is what I think. Whether you are lucky or not doesn't necessarily matter. Luck is a part of almost any venture you take so basically what you need to do is forget about the particular cause and just mark up a "winner". Where people get into trouble is when they are essentially fooled by luck. That is what is at issue here. Remember when you buy a stock there is a pretty wide window of potential outcomes and a 20% return would have to be considered very possible in most cases. I would have to think that lucky is more along the lines of doubling in a month, not just 20% gain.

Where luck becomes an issue is if someone hits 7 winners in a row and starts thinking he is a genius. He should remember that just like the spectrum of possible results for a single stock, the possibility of hitting 7 winners in a row is out there, just as much as 7 losers in a row was as well. If he starts thinking its all about his talent and ignoring the fact that maybe he was running good then this person gets into a whole world of mess. That is why before investing, think much like professional gamblers must. Know what rate of return you should expect (be reasonable) and if you are above it after a period of time be careful not to get burned if you results regress back to something closer to what you would have expected. In other words if your portfolio goes up 30% over 3 months, don't up your individual investments 30%, but instead keep your sizes about where they were before, if not lower, to avoid getting burned by regression to the mean.

[Ray Zee]

as far as i know its illegal to trade on any info not publically available. just like with martha stewart. she was just told to sell by an insider and she did. who wouldnt. but its illegal. same as if you heard the ceo in a bar say that the earnings were rising. you would be trading on insider info and illegally.
you are right in that it is impossible to enforce unless you are high profile. then they destroy you. and they should.

[Wildbill]

But Ray as I keep saying what about info you know yourself from your position? I would guess that drives a ton of the runup volume. And what about non-specific info? Put it this way, say you met me for drinks one night and you knew my job gave me concrete numbers. I tell you "I would definitely look into buying my company's shares now" I say nothing more, but you know that I am privy to reliable numbers. Is that insider trading? I mean I might have said the same thing a month ago when nothing was going on, but you are aware earnings come out soon so you know why I am saying that.

Also realize that even those of us that know all this still aren't able to predict share prices all that well. I might think our number is strong, but the market could be focused on something else.

[Ray Zee]

it is all illegal but the degree is the question. any time you trade on privy info it is insider trading. i bet you could find the sec parameters somewhere on the net.
if you said it when you had no knowledge, you didnt break the rules. if you did it when the earnings were known to you , you just put yourself in jeopardy.

[Wildbill]

I read some sights and they are unclear at best. For example what is material? If I know my company is going to acquire XYZ for $5 share more than its trading at and is going to announce it within a day, yeah I see that is insider trading. If I know that they are going to report 50 cents earnings when the street expects 48 cents, well that isn't so clear. After all I could argue that the company has regularly reported earnings above street estimates or that many people were expecting the company to beat earnings, they just weren't willing to put it into an actual change in estimates. Like all things, there are just so many shades of color out there.

[Ray Zee]

what you are arguing is whether or not you could convince them its not insider trading or whether you could be procecuted. most likely with those senarios they wouldnt bother you at all. its too hard to prove and they are looking for big fish as they are under staffed.

it still falls under the--if you trade on privy info it is illegal. or if you give out that info for someone else to trade on.