Insider Selling

Q When company insiders sell millions of shares of company stock, who are the buyers? — E.B., Riverside, California A Shares sold by insiders such as officers, directors or owners of a company are sold in the open market, where anyone with a brokerage account can buy them. Of course, if there are many more shares for sale than there are interested buyers, the price will drop — until it reaches a point at which buyers will buy. Several million shares certainly seems like a massive amount, but remember that many companies have billions of shares, and in the course of a typical trading day, many have a high volume of trading. In recent months, Microsoft’s average daily volume was about 23 million shares, while Bank of America’s was around 90 million. It can be smart to examine insider purchases and sales for companies that interest you. Some occasional selling is routine, as many insiders get much of their compensation in the form of stock and must sell shares occasionally to generate cash. When insiders buy shares, it’s generally a bullish sign — but one or more insiders unloading a large portion of their shares can be worrisome. You can look up insider transactions at websites such as finviz.com/insidertrading.ashx. *** Q What do “trade date” and “settlement date” mean on my brokerage statements? — T.H., Victoria, Texas A When you place an order to buy or sell a security with your broker, there will be a trade date and a settlement date. The trade date is the date the order was executed, and it’s the one that counts for tax purposes. The settlement date is when the cash or securities from the transaction arrive in your account. Want more information about stocks? Send us an email to foolnews@fool.com.