Insider Info?

[thebroker]

The company I work for allows us to purchase 200 shares every february at a 15% discount. Now being that this is a huge corporation there is a lot of stock being bought. Since I've been paying attention the last few years, I've noticed that the stock goes up quite a bit within a few weeks and then tops out. Then I assume a lot of people dump it for a profit and causes it to drop again. I doubled my money the last 2 years doing this.
I am thinking about going to a broker to buy a 1000 shares now and then sell when It goes up like I believe it will. Would this be considered insider info. If not where could find info like this on other companies? Am I right about the bulk purchases driving the price up? By the way, obviously I'm not a stock broker.

[Wildbill]

I have a similar plan at my work and unless we are considered material insiders then we have no windows that we have to respect. I do avoid most activity in my stock just in case because I am privy to a lot of things and just for ethical reasons tend to keep my money elsewhere, but I could probably defend myself in court. As for your specific case, that isn't insider trading as anyone with charting software could see that the stock goes up at the same time yearly.

[Ray Zee]

if it is a huge corp. its unlikely to get a big enough rise to make much. maybe yours does or was just coincidence. soon anyway smart people will trade ahead of you and wipe out your gain, so you need to trade ahead of them.
i would work out a strategy where i bought early then sold out and went short for a period of time.

[John Ho]

The employee purchasing has to be publicly known already so I seriously doubt it's insider info. If you can see a trend where the trading activity is heavier in those periods you might be on to something but I doubt the float is small enough where the employees are making a difference. Good luck.

[John Ho]

If you find it to be really reliable then you actually have the perfect environment to buy a Feb. or Mar. call option since you know the timing of the event. You could risk less money for the same effect.

[Ray Zee]

thats good john but he has to stay on top of the time decay. so maybe just buying the stock is the superior play.
but it might be good as the time frame has to be really small. because of the large amount of issue and the short time that the event takes place.

[John Ho]

Exactly. I was assuming he was going to buy the stock and quickly dump it in which case buying the option is better from a risk standpoint. He knows the exact timeframe of when this is supposed to happen.

Not sure I would do it without more studying though. You'd hate lose your whole investment as you often will on options.

[PokerBabe(aka)]

Hi broker- If you are not a broker, why use that handle? [img]/forums/images/icons/crazy.gif[/img] [img]/forums/images/icons/grin.gif[/img] Anyway, it is not inside info to use publicly available data for stock purchases. The only caveat is whether you are violating your internal (firm) trading practices prior to earnings announcements, etc. In the firm I used to work for, we were not allowed to purchase stock or options pending news, earnings, etc. Mr. Ho's point about buying a call option is not a bad idea. You can gain more leverage by this method and since you know the time frame of the event in question, it might be the most efficient strategy. However, I would suggest you purchase (deep) in-the-money calls which will act like a synthetic long position. A deep in-the-money call has very little time value, so you are not paying up for it as you do with an out of the money call. If you are correct in your bullish speculation, your in-the-money options will move a point for each stock point move. This is called delta. If you are incorrect, and the stock doesn't move, you can close the position and be done with it. For more information, go to cboe.com. LGPG, and Buy LOW [img]/forums/images/icons/smirk.gif[/img] Babe [img]/forums/images/icons/heart.gif[/img]

[John Ho]

Thanks for the insight.

I noticed in your profile you were an options principal and still trade. If you don't mind, can you elaborate on how successful folks do this? I used to work at a portfolio management firm and we bought put options in late '00 for our clients so I know the basics and the mathematics behind them. I've bought options myself and understand the concept of selling them. But trading them is unfamiliar to me.

[PokerBabe(aka)]

Hi John- Not sure I understand your question, but "trading" options is a lengthy topic. I am typically a seller of options (both puts and calls) as I like to bank the premium vs. paying premium. If you are "trading" long options, the rules are fairly simple: 1) buy in the money options to avoid (minimize) the time premium problem. 2) close the position when you have achieved a preset target or when your position is not profitable (again, you must use a preset exit strategy for losses). I usually buy only Index (OEX) options for speculative purposes. I will ONLY buy them when the market has had an extreme sell off or extreme rally. This is my famous "fade the trend" trading approach. [img]/forums/images/icons/cool.gif[/img] As soon as I buy them, I put in a sell order for 2-3 points higher than the current bid. I hope to achieve this goal the same day as placing the order. This has worked for me many times. If I have to hold options overnight, I will simply adjust to the next day's opening. I prefer a very short term approach to my OEX trading (2-3 days max). I almost never buy options on a Friday, in case I need to carry them over the weekend. I don't like to be whipsawed by news which might be harmful to my position. Each trader has to develop their own guidelines and goals for trading. For insight into trader's thoughts, read Market Wizards by Jack Schwager. For info on strategy, go to cboe.com. LGPG and good trading. Babe [img]/forums/images/icons/heart.gif[/img]