| |
Insider trading is a serious threat that is also illegal. This occurs when people trade a stock based on insider information that is intended to be confidential. The illegal advantage causes a stock to change in value rather quickly.
A company is supposed to report when shares are bought by insiders, such as company directors or high-value shareholders. It has to explain why those insiders are investing in the stock and how many shares they are buying. This ensures that people will know why a stock is moving to a certain value. There are times when it is not reported and the insiders try and pull off trades to make the value of the stock work in their favor without having to spend time producing a report (or even thinking about the tax ramifications that come with such a move).
When insider trading reports are issued, a stock might fall in value. In February 2018, the Wynn Resorts company (NASDAQ: WYNN) was accused of having engaged in insider trading. As this information came out, people started to sell off the stock as this was a sign that the business was not fully secure. The stock went from $180 to $170 in a brief period of time and had been trending downward as well.
There is always a chance that a stock will rebound following issues relating to insider trading. You need to exercise caution.
