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To: Arthur Tang who wrote (743)	3/18/1998 6:36:00 AM
From: Arthur Tang	Read Replies (1) \| Respond to of 1471

Insider trading? How important is the information? There are two types of insiders. Investor usually think of company employees and directors as insiders. The real insider that might be the most important and is never disclosed is the employees of a brokerage or investment banker which has news of impending merger or acquisition. These insiders usually are the targets of SEC criminal investigations. They are known if unusual trading pattern surfaced at SEC, option activity suddenly change just before the news, or simply some one close to the insider squealed. The regular insider trading is required by law to report to the SEC. The information is available to anyone. The judgement of the effect of insider trading can be naive. If many insiders buy then the sentiment is the company has some good news coming. Or if they sell, bad news is coming. This could involve stock options. By looking into the annual reports, you will find that most employees never have the money to invest in stock options. They tend to sell then buy the option on the same day. Many options expire before they exercise the stock purchase. Fundamentally the striking price is always too high because management usually only gets generous when the company does well. The stock price is then too high when they give the option. Some insiders needed money personally and sell the stock at the wrong time. After they sell the stock makes a nice move. How good is the insider buying as a investment tip? Not good. If they can get options why buy from the market? On the other hand, market makers want the insiders to buy the stock, to prove to them the company has a future. Some times, the buyers bought borrowed stock; the price immediately pull back. It may please you that at least the insiders bought; but you still have to do your own research on valuation and future.