Readings: Insider trading, Automated trading
- CXO Advisory: Using Insider Trading to Find Informed Short Sellers
Conventional wisdom says that both short sellers and corporate insiders are typically better informed than most traders. However, much short selling comes from programmed (uninformed) hedging, and much insider trading is pre-planned diversification of concentrated positions by firm executives. Is there a way to overlay the activities of these two groups to isolate truly informed trading?
A hedging strategy long the third of stocks with unusually positive insiders and short sellers and short the third of stocks with unusually negative insiders and short sellers generates an average monthly return of 1.22%.
- Trade-Ideas: What Your Broker Doesn’t Know, Will Reassure You
. . . a fear that when it comes to automating a trader’s trading strategies, their broker can either:
- See your strategies
- Trade against them
- Front run them or some combination thereof
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