The steady leaking of insider information about products under review by the FDA has caused enormous losses for average American investors since the Bush Administration took control of the agency six years ago.
There are several ways that investors can profit from this type of insider information. The first is obvious, buy the stock because approval of a product will almost certainly raise a company's stock value. Investors who know about the decision ahead of time can bet the farm based on that information.
But investors who are tipped off that a product will not be approved can do the opposite. They can bet that company's stock value will fall by selling the stock short knowing full-well that the minute the news of non-approval becomes public, the stock's value will drop like a rock.
When the leaking of this type of information occurs, the losers are always the investors who play by the rules and make bets based on the best public information available. Unfortunately, in many instances, these are the very people who can least afford the loss.
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