Key insights
- The author questions who is truly harmed by insider trading, suggesting that retail investors engaging in speculative strategies like short selling or buying puts bear the responsibility for their own risk. The author posits that market makers are the primary losers, bearing the cost of payouts due to insider trading gains. The overall impact on the broader public is questioned.
I started thinking, let's say I'm a politician and I get news of some event that's going to happen, and I buy a stock. The stock performs incredibly and I make $100 million.
As far as I know, there are people who own the stock, people who have options either way on the stock, and people who short the stock.
The losers in a situation like this would be people who have puts (speculation based on public info), people who are short the stock (again, speculation), and the market makers.
So for someone to inside trade - who are they really harming? Who's getting hurt? To me it seems like any retail investor is responsible for their own risk management; if they're short a stock or have massive put positions, that's on them for betting against the market, and I have no sympathy there. But the market makers - they're the ones that have to pay out the winnings. Where does their money come from? Does this actually hurt the public?