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Look For Insider Open Market Transactions Before You Invest in Stocks

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Most individuals invest in stocks in the open market. They find the bid and asked price for the shares and execute their trades in the open market. But insiders have numerous other methods for acquiring or disposing of shares such as private placement, exercise of options. When they invest in stocks, some of the transactions are not in the open market and therefore aren't registered in the trading volume and other statistics.
 
This is just common sense that if insider can buy their company's shares at certain percent below the market value directly from the company without paying commissions and trading costs, they can still make a nice profit even if the stock price moves only sideways over the next year. Such an advantage obviously influences insiders' risk/reward calculations and their decision to invest in stocks.
 
Therefore, when insiders buy their company's shares in the open market, they have to make the same risk/reward calculations individual investors do. They must figure in the trading costs of paying commissions and buying at their stock's asking price. A decision invest in stocks on the open market is worth the risk even with these costs is a much stronger signal to us.
Do you know you can use the filtering feature in Research Tools to look for open market transaction only?
 

 

How to handle "Funny Data" when You Invest in Stocks


 
By funny data we refer to trades in which some aspect of the data don't appear to make sense. Transaction prices may be below the stock's trading range for the day and sometimes even for the year. Perhaps the number of shares traded by insiders is more than was recorded in the open market o that day. The price of the transaction may be missing as well. Most common errors are:
 
Submitting a form twice to the SEC
 
Filing in the transaction price incorrectly
 
Submitting a form with an incorrect transaction code
 
Submitting an option-related trade as an open market transaction
 
Most of the data errors are created by insiders themselves or by people who fill out the SEC forms for them. Even lawyers who are paid well to do this paperwork for busy executives sometimes make mistakes. Don't get confused by the "Funny Data". Just move on and research another company. If you are really interested to particular company and found funny insider data, before you invest in stocks you may contact the company's investor relations department for more information.

 
Do you know you can use the filtering feature in Research Tools to remove most of the funny data?
 

 

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Disclaimer

InsidersLab.com focuses on tracking and monitoring insider trading activities in the US stocks market. "Insider Trading" means trading activities created by company directors, senior officers, individual substantial shareholders, and institutional shareholders. InsidersLab.com does not represent, warrant, nor endorse the accuracy, reliability, completeness or timeliness of any of the information, content, views, opinions, recommendations or advertisements (collectively, the "Materials") contained on, distributed through, or linked, downloaded or accessed from any of the services contained on the website (the "Service"), nor the quality of any products, information or other materials displayed, purchased, or obtained by you as a result of an advertisement or any other information or offer in or in connection with the Service (the "Products"). InsidersLab.com collects insider trading information from different public sources such as newspapers, financial information websites, and government statistics publications. You hereby acknowledge that any reliance upon any Materials shall be at your sole risk. In particular, none of the Materials is provided on the InsidersLab.com website or emails with a view to inviting, inducing or encouraging any person to make any kind of investment decision. Securities or other investments referred to in the Materials may not be suitable for you and you should not make any kind of investment decision in relation to them without first obtaining independent investment advice from a person authorized to give it.