Insiders are not prevented from trading in their own stock. Some insiders buy and sell stocks to make personal profits; others relay information to friends or others who trade the stocks before the information is available to the public. Corporate traders who trade their company's stocks must report all the details of the trade to the SEC on or before the 10th of the month following the trade. The internet is the best source of information on insider activity. Although several market forecaster use total insider activity to anticipate broad stock market movements, the relationship between total insider buying and selling and changes in the overall market is rather tenuous. Insider trading is a useful clue about the prospects of an individual company. Several academic studies have shown that stocks bought by insiders outperform the market. A good insider buy signal is when three or more insiders have bought and none have sold a stock within the most recent three month period. Conversely, an insider sell signal is when three or more insiders sell and buy none within that same period. Insider sell signals are not as accurate as insider buy signals because insiders may sell stocks for tax or other reasons not related to their perceptions of how well or how poorly their company is doing.
Many UAW workers have shorted General Motors stock and some financial analysts are asking why, why now? If the employees and Union Members are allowed to short the GM stock then why can't its executives or the company short its own stock? Insider Trading - Blogging That Might Be Risky Business.
Insider trading is the buying or selling of stock based on information not available to the public, often caused by a leak.