From the course: Economic Tips for Everyone

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Legal and illegal insider trading

Legal and illegal insider trading

From the course: Economic Tips for Everyone

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Legal and illegal insider trading

- When you hear the words insider trading, you probably think about people trading on secret information, and that's illegal, but there's also a thing called legal insider trading. This happens when executives at a publicly-traded stock company buy or sell stock in their company and they properly disclose the trade. Some investment firms monitor these legal insider trading sales disclosures, and they're most important when legal insiders are buying shares rather than when they're selling, why? Well, because executives can have many reasons for selling stock. After all, at some point they want to turn their stock into cash, and they need to pay for food and housing and clothing, and then they might want to buy a yacht or a private island too, but if they don't turn their stock into cash, they can't buy anything. But there's only one reason executives buy stock in a company where they work. It's because they expect the…

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