Post: #1

Say you're working at a Corporation X. Let's say you're not in one of those cool areas like Mergers&Acquisitions, Portfolio Management or whatever but just a general dude. You see a thing happen with customers here and there, you hear something about suppliers now and then, you get wind of projects sometimes.

How could you use that information?

A corporation is big, so the chance that any one project will have a significant impact on the stock or the balance sheet will be fairly low and will go under in the whole balance sheet. Focus on the customers if they are small enough and a successful project might have a positive impact on them? Focus on the supplier with whom you know business spend will increase?

There has to be a way to skeddadle and take advantage here somehow. Ever heard about friends of friends managing to pull it off? Brainstorming per PM?

Post: #2

How relevant is the information to earnings? Is the company publicly traded? How many people have access to that info(classified documents vs observational insights)?

All things you have to take into account.

A little story: Eons ago, I worked in the distribution center of a Best buy starting in the summer. This location served a massive footprint across the West and Mountain areas. Since the beginning it was brought to our attention that during the December holiday season it would be a blackout(no vacay, timeoffs, etc) as the company makes or breaks it's fiscal year during 1 of 2 times in the year and Christmas is 1 of them. Things were crazy leading up to Christmas Eve with 16 hour shifts regularly, but then the day after Christmas, supposedly the busiest day of the year, we were all sent home in 3 hours. Didn't even make it to lunch.

Next quarter, Best Buy announced terrible earnings and the stock went down >10%. Now this is all implicit evidence, I never looked at the company's audited financials but I and everyone working that day after Christmas understood something was off.

That's the kind of insight you need to have. Hope you learned something.

Post: #3

stock price is usually correlated to meeting analyst consensus.

So
If you have access to sales info, you may have a good insight into the actual earnings. If it is way below - you can short the stock. If it is going to surpass the predictions, you can buy.
Focusing on suppliers also sounds like a good idea.

Post: #4

Know all relevant laws and regulations, and don't break them.

Using material, restricted-access sources of information (ie eavesdropping on the CEO, reading memos, etc.) is generally prohibited. However, there is a concept of "mosaic theory" which means using public sources of information (public accounting statements, published speculation) together with non-material non-public sources of info (seeing CEO out to dinner with big investors) to put together a big picture is ok.

Don't buy short-dated out of the money calls / puts. First thing they look for when M&A happens. They'll also look if the people who made out like bandits have ties to the company at hand. Also keep in mind your company policies and those contracts you signed.

IANAL*

*I am not a lawyer

Post: #5

There are scores and scores of opportunities as to how to make money off insider information - all legal (if the concerned parties keep their pie-hole shut). The bigger problem is access to the information.

Many politicians and CEOs have private portfolios with outraging performances of hundreds of percent. Hillary Clinton for example had those and so do many politicians. US politicians for example can act on any insider information - they have legally exempted themselves from prosecution a few years ago.

How do corporate high-rollers do it? On the golf course and other events they share relevant infos from each other's companies and the other one reciprocates in kind later. Essentially they don't trade on their own company infos, but on the other guy's. There are of course countless tools of investing via shell corporations and profiting from it.

If you do it in the lower levels and hear something - earning surprise, special announcement like withdrawal of a car line, pharma blockbuster etc. - then you can act on it simply by using friends. You are not going into this whole thing with millions in options. At best guys at the bottom put in 100k and that already is a big position, because it can net you millions if the event is big enough.

Keep your eyes and ears open. Investing and not getting caught is not problematic, getting the correct info in time is all-important. Also I might add earnings announcements are not as clear cut as it seems - you would have to have it massively out- or underperforming to get a big move. Best are out of the ordinary statements like massive unexpected losses, breakthroughs in R&D, cash-cow impacts, huge lawsuits, etc. The investment accounts of politicians are a living proof that you can be a potato and never even look at one chart of a company and still make 100%/year each fucking year. They could be making likely much more, but prefer to have 40-200% "realistic" returns.

I have friends who pulled it off, but the incidences were usually rare, because you need either to have someone high-up or at a crucial information network position (secretary of VP etc.).

Post: #6

I used to work in M&A. I used to mentally play the game you are talking about. The interesting thing is half the time I would have lost money, because the way you make money is to surpass market expectations, and if the deal is only so so, then the stock may actually decline.

Aside from that practical reason, the legal reason is that its illegal. And if you only make a few bucks, they'll start with you because you can't mount a defense.

They way to do this effectively and legally, though, is to understand your industry and detect trends before others do. Here is an example. There are about 20 large banks in the U.S. They all report earnings over about a 2-week period. Say you work for bank no. 3, and its earnings have changed suddenly. Well, odds are that those sorts of changes are going to affect all banks. So its illegal for you to trade bank no. 3 because you work there, but you could trade bank no. 17 safer still an index of bank stocks.

Post: #7

< Exactly - event based trading is only truly useful with outrageous events. Many seemingly good or bad news are already factored into the stock price and put barely a dent into it.

I can remember one event where friends participated - a major pharma blockbuster had to be taken off-the-market and the company took a huge hit. Those are the best events - super-easy to trade, but they put a damper on the info - only few people know in R&D and higher-ups, but I am sure that some people at the company made tens of millions off it if not more.