By Ilene & Dave
An insider/officer at Seagate buys 150k shares, for over $1.2 million. On the surface, it looks like a great i-buy for trading — i.e., officer buying, large quantity, popular tech stock. But there are problems which illustrate important factors to look at when deciding whether or not to take an i-buy trade.
1. For an i-buy day-trade, you want to get in as early as possible. However, take a look at today’s chart. Here’s what i-buy trader Dave says about it: "Something fishy there. The filing was widely known before it hit our source. Volume started to spike at 11:09, then big spike at 11:10. SEC time stamp is 11:11:04. Price popped from $8.26. I didn’t get in till $8.39."
STX is now trading at $8.33. Had I recommended buying before writing this post, we could have gotten in at around $8.41. The initial "pop" is over. (Yahoo quote here.)
2. STX is a $4B stock trades over $100M a day. So the effect of i-buy traders is going to be overrun by the effect of program trading. What’s the cut-off for market cap? We use $1B, but it’s not absolute.
| Buy(P) or Sell(S) |
P/S date | Filed Date | Company | Symbol | Insider | Relationship | Share Amt. | Unit Price | Total Proceeds | |||
| P | 5-20-09 | 05-22-09 11:10:10 | Seagate Technology | STX | DEHAAN DOUGLAS J | officer (SVP, DRIVE OPS & MATERIALS) | 150,000 | $8.24 | $1,235,980 |
You may be wondering how the stock price jumped before the insider buy was filed at the SEC. Dave explains: "most of the world gets the data from the SEC ‘front page’ of filings. No matter how fast anyone’s program, we’re not getting that info any faster than the time stamp, or probably 60 seconds after that. Someone’s tapping into the in-going pipeline to the SEC, accessing data before it gets processed and put on the front page.
"I’m guessing someone in IT at the SEC has changed something to create a somewhat longer delay between incoming filings and the time they appear on the front page."
So a delay is occurring before the SEC time-stamps the filing, giving someone access to the information faster than most programs monitoring the SEC’s site. We know this because there was a big volume spike before the SEC even says it has the data.
Dave: "I’m not sure there’s anything nefarious going on (though maybe there is). We’ve known for years that big data users can access SEC data via an alternate channel from how the rest of us see it, but the delay is typically so small that the effect is nil. However, sometimes the delay opens up so wide as to be unfair. This anomaly lasts for two or three days, and happens maybe once a year. I’m guessing they fix the problem when they receive complaints."
Thanks Dave!
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