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Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

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Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#71

Post by clbrmbr »

cedws wrote: post #19

I've been thinking about building a system that would enable me to quickly react to black swan events like this should they happen around me in daily life. The problem is that most of my funds are in savings accounts that take 1-2 business days to withdraw from, so I'd have to keep them in accounts that are faster to access. Also, this information that the passengers had in advance could have been worth millions in t…

Verification of time-sensitive rare events from strangers is hard. But I can see how that could really increase your potential winnings.

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#73

Post by pavlov »

patmorgan23 wrote: post #63
mathiasgredal wrote: post #48

Earlier quoted context omitted.

Well, if I found an unpatchable zero-click RCE exploit on an iPhone, then that would have a major effect on the stockprice when the news is announced. It definitely seems like it would be insider trading if i used that knowledge to do options trading.

Only if you were an employee of apple (or one of its vendors working on the iPhone). If you independently discovered it, any other member of the public could have discovered it (assuming they had the skills and time).

This is basically how professional short sellers like Citron Research and Muddy Waters work.

They spend months doing research and if it’s promising they first build their short positions, then publish the research. Often just being targeted by these famous short sellers will crash the stock. But it’s not insider trading because their research was independently sourced.

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#75

Post by colinmorelli »

sokoloff wrote: post #69
colinmorelli wrote: post #57

Earlier quoted context omitted.

It does seem quite odd to say "it doesn't matter one whit whether the information was material or public" when insider trading is defined as: the trading of a company’s securities by individuals with access to confidential or material non-public information about the company. Further, I struggle to understand how one could learn information which is non-public without "theft" of that information. It would seem that,…

You’re missing a clause in what constitutes illegal insider trading. From an SEC site: https://www.investor.gov/introduction-investing/investing-ba... (italics added by me) > Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security.

My statement was copied from Cornell Law's definition [1].

But, yes, all of these shorthand definitions are designed for the general public's consumption, and skip over specific nuances - including the SEC's definition. The sentence read above would seem to permit a person with a fiduciary duty to share information with someone who does not have one, and for that person to trade based on the information. However, we know this is not permitted.

In any case, I think my comment still stands. I specifically called out in my parenthetical in the original comment that the information would need to be knowable only by those with a fiduciary or confidentiality obligation to the company. This seems to cover your comment and sibling's concern.

[1]: https://www.law.cornell.edu/wex/insider_trading

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#77

Post by nightpool »

colinmorelli wrote: post #41
jasode wrote: post #34

Earlier quoted context omitted.

>I think this is wrong as well. The gp's wording is a little confusing but he's just trying to explain the transitive logic of non-public information transferring from a "true insider" to an outsider is also "insider trading" and thus illegal. Think of it as the provenance of information coming from an insider. E.g. Martha Stewart is an "outsider" and not an insider of drug company ImClone but she was found guilty of…

Slightly clarified my comment via a parenthetical. "Non-public" in this context refers to information which would only be available to those with a fiduciary responsibility and/or a confidentiality obligation to the organization. I was trying to avoid the use of "insider," because people tend to assume that means employees or directors, but that is not the case. Outside organizations who have, as an example, signed a…

> "Non-public" in this context refers to information which would only be available to those with a fiduciary responsibility and/or a confidentiality obligation to the organization.

Right, but information available to those with a confidentiality obligation can still be traded on if acquired legally. That's the crucial point. It's not enough for it to be non-public and material, you must also be in breach of a fiduciary duty (or acting in concert with somebody who is). For example, if a Boeing CEO was at a coffee shop discussing an upcoming acquisition at the table next to you, you'd be able to trade on it, even though it was confidential information not available to the general public and obviously material to Boeing's stock price.

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#78

Post by BMc2020 »

Ctrl-F Casino Royale

During the film, the terrorist financier Le Chiffre uses a Ugandan warlord's money to short-sell stock in Skyfleet, thus betting the money on the company's failure. The banker plans to bring about said failure by destroying the company's prototype airliner. After his original bomb-maker is killed by James Bond in Madagascar, another is hired to complete the job. The bomb-maker infiltrates Miami International Airport and steals a fuel tanker; attaching a keyring-sized bomb to the vehicle. As he attempts to blow up the prototype with the truck he is intercepted by 007 and a fight ensues on-board. Eventually the terrorist is forced from his vehicle and Bond narrowly prevents the truck from colliding with the plane. With his plan foiled, Le Chiffre is left with a major financial loss and is forced to set up a high-stakes poker tournament at Casino Royale in Montenegro.

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#79

Post by loeg »

clbrmbr wrote: post #67

Hmm. So a rouge Meta employee could put a barometric pressure monitor in Messenger or WhatsApp (that people use even without paid in-flight wifi) to detect depressurization and automatically short the airline and aircraft manufacturer.

This would probably be violating the employee’s fiduciary duty to Meta.

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#80

Post by graphe »

fbdab103 wrote: post #53
Ekaros wrote: post #49

Earlier quoted context omitted.

Like if you were mechanic for the airline and got message that we will be landing with missing door. And then traded stock of airline on that information. Being in the crew of the plane might get more messy at least when done with airline. Boeing less so.

This is the part which I find really sticky. What about all of the non-Boeing employees who interface with the equipment for their job? The pilot, flight attendants, air traffic control, EMTs, etc. They have no direction association with Boeing, yet you could make an argument it was part of their responsibilities. On the other hand, if your employer gives you X-brand wrenches, which frequently fall apart in your hand…

Like all laws it's about enforcement. They can say whatever they want we know "insider trading" is a natural human response to information. Unless they can prove it was insider trading it isn't.
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