Insider Selling Comes Roaring Back

Last Updated Nov 2, 2011 12:56 PM EDT

Insiders do not sell low. Just look at how they behaved in October. As the market soared to its best month in 24 years, insider selling came roaring back after two straight months of near-record lows.

Insiders, including CEOs, CFOs, chairmen and directors, sold $21.43 in U.S. stock for every $1 purchased last month, according to new data from Thomson Reuters.

That's closer to the monthly average going back to December 2010, which stands at $23.57 to $1. (Insiders always sell more than they buy.)

The lesson here for retail investors is that when the market was swooning in August and September, insiders held tight. They didn't dump shares into the panic.

Indeed, in August and September the sell/buy ratio dropped to levels last seen in late 2008, when markets were reeling from the collapse of Lehman Brothers and the global financial crisis. Also note how insiders sold far fewer shares when the market tanked in June:


Insiders don't panic for a bunch of reasons. (You can't make money exercising underwater options, for one thing.) But they also know that volatility is not your friend. The idea is to sell high, remember?

With the Greek debt crisis throwing global markets back into a tizzy of volatility, we'll say it again: Stay frosty. Don't lock in losses. The insiders sure won't.

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    Dan Burrows, a veteran of Aol's DailyFinance, SmartMoney and MarketWatch from Dow Jones, covers the markets and economy with an eye toward investing for the long haul.