What's it called when you get inside information about a stock?

Question

For example, say someone on the "inside" (or if you're the inside man) told you the value of a stock is going to rise, so you buy shares for cheap and sell for a huge profit later on because the prices have risen dramatically. What's the name for this illegal offense?

Answer 1

It's called Insider Trading.

This prevents a couple of things that are detrimental to the majority of the stock holders.

Scenario 1: You are working for a company that is awaiting on FDA approval. Most stocks rise sharply after such an approval or drop when denied. You find out (before it's public) that the approval was denied. You then sell all your stock at the current peak and when the stock drops, the poor schmucks who purchased the shares you sold not have lost major bucks.
Scenario 1: Same situation but this time you find out the FDA will approval before it's public. You then purchase tons of stock from the unknowing public stockholders. When the approval is made public, the stock rises tremendously and you make the huge profit that the poor schmucks who sold to you should have made.

There are lots of other scenarios that can be discussed but these two are the easiest to understand. People who work for publicly held company are all 'insiders' and must be very aware of the appearance of their knowledge when doing any trades of any volume. Just lying about the knowledge of Insider Trading can land you in prison... even if your Martha Stewart!

Hope this helps!

Answer 2

Insider Trading

Answer 3

Insider Trading

Answer 4

Insider trading.

Answer 5

Insider trading. Just ask Martha Stewart. I'm sure she could give a 2 hour dissertation on the subject.

Answer 6

Insider information

Answer 7

1

Answer 8

Insider Trading, and yes, it is illegal.

Answer 9

Insider information.

Answer 10

insider trading