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Statistically on any stock with a large trading volume there's pretty much always going to be someone who bought up right before a big announcement purely by ch

Statistically on any stock with a large trading volume there's pretty much always going to be someone who bought up right before a big announcement purely by chance, realized they got lucky and sold immediately afterwards. It's not obvious to me how you'd separate this from intentional trading on insider information. (Unless you just investigate everyone).

lordnacho 6y ago
You'll find that even on some fairly large names there isn't all that much activity during the day. There's a lot of names, and there's a lot of trading in the auctions, so the total volume in the market won't result in a steady flow for a particular share. My guess is it will stick out like a sore thumb if you buy x shares right before an announcement and sell x right after. Especially if you do nothing else. Pretty much as soon as you've exited a second announcement-trade red lights should be flashing.
dasudasu 6y ago
They don't prosecute for a random one off. It's always people that have done it multiple times, so they establish a pattern.
- hansvm 6y ago
  Some napkin math suggests that there are enough retail trades (8.1M/day) that under some weak constraints (most are for short-term positions, higher market cap stocks are more likely to be purchased) you're still quite likely to find a few people who have "established a pattern" quite by accident. As long as they're just investigating and not necessarily prosecuting every event that probably sounds fine (I'd be curious to know what the prosecution "funnel" looks like for flagged individuals in real life -- 100%? 1%?), but it's important not to let an intuitive sense for things that are definitely too unlikely to happen by chance to cloud our judgement and create something like another Sally Clark event[0]. [0] https://en.wikipedia.org/wiki/Sally_Clark https://en.wikipedia.org/wiki/Sally_Clark

lordnacho 6y ago

You'll find that even on some fairly large names there isn't all that much activity during the day. There's a lot of names, and there's a lot of trading in the auctions, so the total volume in the market won't result in a steady flow for a particular share. My guess is it will stick out like a sore thumb if you buy x shares right before an announcement and sell x right after. Especially if you do nothing else. Pretty much as soon as you've exited a second announcement-trade red lights should be flashing.

dasudasu 6y ago

They don't prosecute for a random one off. It's always people that have done it multiple times, so they establish a pattern.

hansvm 6y ago
Some napkin math suggests that there are enough retail trades (8.1M/day) that under some weak constraints (most are for short-term positions, higher market cap stocks are more likely to be purchased) you're still quite likely to find a few people who have "established a pattern" quite by accident. As long as they're just investigating and not necessarily prosecuting every event that probably sounds fine (I'd be curious to know what the prosecution "funnel" looks like for flagged individuals in real life -- 100%? 1%?), but it's important not to let an intuitive sense for things that are definitely too unlikely to happen by chance to cloud our judgement and create something like another Sally Clark event[0]. [0] https://en.wikipedia.org/wiki/Sally_Clark https://en.wikipedia.org/wiki/Sally_Clark