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417 points mkmk | 1 comments | | HN request time: 0.204s | source
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kypro ◴[] No.37601673[source]
I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition?

1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy?

2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's not enough just to say the trade was statistically unlikely, or is it?

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cmcaleer ◴[] No.37602055[source]
I've thought about this type of question a fair bit. I'd even go one step further and ask what if you're in a position where you might hear about this stuff now and then (but not in a way that's easily provable, say you regularly take a train at the same time as an M&A lawyer that you shouldersurf) and you semi-regularly buy $1,0000ish (of variable amounts) in low-DTE options basically on no information - the whole purpose of it is you're buying 'insurance' where you're paying some% premium for obviously -EV trades.

You do this for months (hopefully without your M&A 'friend' swapping jobs or going WFH) before you shoulder surf that a publicly traded company is being acquired at some massive premium and spear the whale for low-DTE calls within 2S.D. of your normal range.

If you get investigated you can just say that you regularly take these kinds of punts for fun. You've got a record to prove it. You've got no contact with people in these positions, you can provide your entire social calendar and contact list and be probably many steps removed.

FWIW I keep all my money in some individual stocks and index funds. I just think this kind of hypothetical is a pretty fun situation to try to optimize for.

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1. pc86 ◴[] No.37602219[source]
The hardest part of this whole thing is finding someone who a) gets regular access to potential useful information, b) talks about it in public, which most of them probably don't, c) you can generally be close enough to overheard consistently but without being "that weirdo that always wants to sit behind me", all while being lucky enough to hear something at the right time.

If this guy had bought these calls last week (at same DTE) all he would have accomplished is donating $22k to some bank or hedge fund somewhere.