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red sox 777 03/22/20 4:22:05 PM #228:	Moonroof posted... Super ignorant question. It seems that whenever an insider buys shares of their companys stock, it attracts attention which in turn causes the stock to rise (people see an insider investing heavily which causes them to think something big will happen, so they too feel compelled to invest). Maybe the stock wont go up the same day, but within a week or so. Knowing that, cant the insiders use this to their advantage? They invest, take a hit as the value goes down at first, and right before it goes up, another insider (whom theyre in cahoots with) invests an even larger amount. So large, that they cover the loss by the insider and then some. This assumes that an insiders investment is enough to raise the value of a stock, and by a margin significant enough for the second investor to get it all back. An insider buying can raise the stock through two different mechanisms. One, outsiders see the insider buying and think this portends good things for the company. This may have a delayed effect. Two, sending a large buy order itself immediately drives the price of the stock up, because the demand for the stock has increased. Conversely, selling a large block of stock immediately drives the price of the stock down. Imagine if Bill Gates wanted to sell all his Microsoft stock at once on the market without a period of time to advertise that he was selling this stock - the stock would crater because there aren't people looking to buy tens of billions of dollars worth of MSFT stock all at once. It would only get enough attention to find buyers for all those shares after the price plunged, which would cause Bill Gates billions in losses from poor trading technique. What you are describing would probably only work if the person working with the insider was not an insider so they didn't have to disclose their trades. Then, they could buy before the insider and profit when the stock went up after the insider publicly bought. But my guess is, that would be banned by the laws against insider trading. --- September 1, 2003; November 4, 2007; September 2, 2013 Congratulations to DP Oblivion in the Guru Contest! <cite>red sox 777 posted [p:936054645] in Stock Topi... [t:78451720]...</cite> <quote>Moonroof posted... </cite> <quote>Super ignorant question. It seems that whenever an insider buys shares of their companys stock, it attracts attention which in turn causes the stock to rise (people see an insider investing heavily which causes them to think something big will happen, so they too feel compelled to invest). Maybe the stock wont go up the same day, but within a week or so. Knowing that, cant the insiders use this to their advantage? They invest, take a hit as the value goes down at first, and right before it goes up, another insider (whom theyre in cahoots with) invests an even larger amount. So large, that they cover the loss by the insider and then some. This assumes that an insiders investment is enough to raise the value of a stock, and by a margin significant enough for the second investor to get it all back.</quote> An insider buying can raise the stock through two different mechanisms. One, outsiders see the insider buying and think this portends good things for the company. This may have a delayed effect. Two, sending a large buy order itself immediately drives the price of the stock up, because the demand for the stock has increased. Conversely, selling a large block of stock immediately drives the price of the stock down. Imagine if Bill Gates wanted to sell all his Microsoft stock at once on the market without a period of time to advertise that he was selling this stock - the stock would crater because there aren't people looking to buy tens of billions of dollars worth of MSFT stock all at once. It would only get enough attention to find buyers for all those shares after the price plunged, which would cause Bill Gates billions in losses from poor trading technique. What you are describing would probably only work if the person working with the insider was not an insider so they didn't have to disclose their trades. Then, they could buy before the insider and profit when the stock went up after the insider publicly bought. But my guess is, that would be banned by the laws against insider trading. --- September 1, 2003; November 4, 2007; September 2, 2013 Congratulations to DP Oblivion in the Guru Contest!</quote> ... Copied to Clipboard!
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