Insider trading is when corporate insiders (officers, directors, and employees) buy or sell shares of their company. When corporate insiders trade their own stock, they must report those trades to the SEC.
Illegal insider trading refers to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include “tipping” such information, securities trading by the person “tipped,” and securities trading by those who misappropriate such information.
A popular trading strategy is to track insider buying in stocks. The idea is that insiders sell stocks all the time but when insiders buy their stock it could suggest good news is ahead for the company. Traders track insider trading using publicly available SEC filings of Forms 3, 4, and 5.<< Back to Glossary Index