Guy Cohen - The Insider Edge: How to Follow the Insiders for Windfall Profits

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Copyright 2012 by Guy Cohen. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:
Cohen, Guy.
The insider edge : how to follow the insiders for windfall profits / Guy Cohen. 1st ed.
p. cm. (Wiley trading ; 582)
Includes index.
ISBN 978-1-118-24528-6 (hardcover); ISBN 978-1-118-28484-1 (ebk); ISBN 978-1-118-28434-6 (ebk); ISBN 978-1-118-28255-7 (ebk)
1. Stocks. 2. Profit. I. Title.
HG4661.C595 2012
332.63dc23
2012015372

Preface

Between January 1, 2008 and February 28, 2008, Bear Stearns (BSC) shares traded in a range between $68.18 and $93.09.

On March 3, 2008, Bear Stearns closed at $77.32 (see ). At around this time most commentators (famously including those on CNBC) were suggesting that BSC could be a takeover target and, as such, were bullish on the stock's prospects.

BSC March 3, 2008 Chart

Source: OVI Charts. Courtesy of FlagTrader.com . Go to www.theinsideredge.com for more information.

At the same time, an unknown new indicator plummeted to its lowest possible reading for BSC. In itself that wasn't the key factor. It's the fact that for the next two weeks the indicator remained at its most negative reading for all but two days.

Exactly two weeks after the unknown indicator plummeted, BSC went into free-fall, reaching a low of $2.84. Bear Stearns was indeed taken over, but at $10 per share, a far cry from the heady heights of $77.32 (see ).

BSC March 17, 2008 Chart

Source: OVI Charts. Courtesy of FlagTrader.com . Go to www.theinsideredge.com for more information.

This was one of the most dramatic declines in the history of the stock market, and yet not one commentator saw it coming.

And yet, there were people who DID see it comingand they made a fortune from it, too.

How do we know this? Well, the unknown indicator measures options transactions for individual stocks. And in the case of BSC, the indicator went crazy to the downside two weeks before BSC collapsed!

Someone, somewhere knew something

In this book you're going to learn how to spot another Bear Stearns, or, more positively, how to spot a meteoric rise in a stock before it happens. The unknown indicator is now unveiled.

Whatever your trading experience or proficiency may be, this book is for you, provided you want to make money in the markets.

That's a pretty bold statement, but the reason this book is for you, regardless of your prior experience, is because the method within is effective, simple, and easy to apply.

This is music to the ears of anyone who just wants to make money from the markets. It doesn't matter what your proficiency is; we all want a time-efficient way to make money from the markets, and this book delivers exactly that.

I should also emphasize that this is not a book on options! We will refer to options because part of our method relies on following what the savvy options traders are doing, but this is specifically not an options book.

The way we do this is by following a simple indicator that is derived from options transaction data. See the diagram in . If you can identify where this line is positive (above the horizontal line) or negative (below the horizontal line), then you qualify. It's that simple!

OVI Simple Line

The basic premise of this book is as follows:

What you'll discover during the book is what chart pattern, what indicator, and how to implement the trading plan.

The uniqueness of this book resides with the special indicator (the OVI), which is derived from options transactions data. We're basically going to follow what the savviest traders in the market are doing. We stick to a simple chart pattern to improve our odds further, and we implement a safe trading plan that enables us to make windfall profits if a trend develops.

So, what exactly is the OVI?

Well, it's an indicator that oscillates between 1 and +1. When it's positive (and there's a corresponding chart pattern) then we focus on buying opportunities. When it's negative (and there's a corresponding chart pattern) we focus on shorting opportunities.