InvestorQ : What are the types of insiders that I need to keep a tab of?
Nishita Gala made post

What are the types of insiders that I need to keep a tab of?

nishi Shah answered.
3 years ago

Broadly, there are 3 kinds of insiders that you need to keep a tab on. All these segments have an in-depth understanding of the inside workings of the business.

Firstly, there are the promoters, promoter family groups and independent directors who have an advance understanding of what is going on in the company. Yes, after all, they know more about the prospects of the business than all of us put together. If you see visible buying or selling from them, it is probably time to just delve a little deeper and understand the logic behind their actions.

Secondly, focus on what institutions are doing in the counter. You can closely track both the domestic institutions and the FIIs. Mutual funds and FIIs surely know a thing or two. They have access to top management, regulators, dealers, auditors and solicitors. If you see a herd instinct among institutions, you surely ought to take that seriously.

Finally, check for the signals and cues coming from the futures and options market; also called the F&O market. This is slightly tricky, but the indications cannot be missed. Many insiders would prefer to adopt the F&O route to avoid too many questions. Are futures getting accumulated? Are OTM calls or put options being bought? There is a lot of wisdom in understanding what the F&O market is indicating because even insiders are quite active in this market. Buying stocks in the market, not as an insider, is like a man buying cows in the moonlight.