Chris Haroun explains an event-driven trading strategy using a confidential list of companies under SEC investigation before public disclosure. Investors can short these stocks expecting price drops when investigations become public, or go long on companies cleared after temporary negative press. The strategy requires distinguishing between investigations that find fraud versus those that resolve without findings.
I can still access a list of all the public companies being investigated by the SEC but have not disclosed the investigation. You can short the companies that you think will go down when the investigations come to light
and go along on those that get dinged by the bad press from being looked into and shoot up when they're ultimately cleared.
This is a classic event driven strategy profiting from news of regulatory investigations. And let's break this down. So Spiros has a list of companies under the SEC investigation that the public doesn't know anything about yet and perhaps from his prior work recall he used to be at the sec. It's like he kept a confidential cheat sheet and some of those probes will turn into serious fraud or misconduct. And when those eventually become public or lead to charges, the stock price of that company will likely plunge because investors hate uncertainty and potential fraud. Other investigations will end up being nothing and those companies stock might dip on initial news of an inquiry
but when they're cleared of the wrongdoing from the sec, the stock will bounce back up.
