Today we’re diving deeper into using insider trading to filter opportunities in the stock market.
I decided to see what happened when we added insider selling to the screens I use to identify hopelessly overvalued companies experiencing financial difficulty.
I’m by no means a huge trader, but I’m not opposed to putting on a “chicken short” using puts or put spreads from time to time, either.
If you can get a high-probability trade on an overvalued company, then putting a few dollars into a small trade can have huge payouts over time.
But in order to succeed you need the right rules, discipline, and a few good targets like these…
This week I’m spending some time testing the theory from a recent paper on how insider buying and selling affects different bearish and bullish factors.
I’m finding that adding insider data to our stable of numbers-driven market strategies really boosts returns, and more importantly, it does so by avoiding potential problems.
While insider buying does magnify gains somewhat overall, where portfolio returns go into the stratosphere is using insider selling to cancel signals that would otherwise be a buy.
This helps us avoid the big mistakes and keeps the focus of the portfolio on those companies where insiders have been buying.
The results from this combination create a portfolio that’s a laser-focused rocket ship to big profits…