I tried researching (I’ve been watching Suits and I’m at the part when Stutter is accused of insider trading) and I still don’t understand what they mean by “making trades based on nonpublic information”. So please explain like I’m five what this really means.
In: Economics
It means making trades (buying or selling) based on information that *nobody else has*.
The classic example would be something like – You’re CEO of RottenApples Inc. Your company is getting ready to release a new product next month and the stock market thinks it will go well so your stock price is at $20. However, you as the CEO know that actually the product has a major flaw and will either not go to market at all or be a major failure. Knowing that the price of $20 is as high as it’s likely to get and that once news breaks you’ll be lucky if the stock price is $5 a share you sell all your shares.
Nobody else (or at least nobody in the general public) knows that information. You have an unfair advantage.
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