Sometimes, Wall Street has a very convoluted way of looking
at things. For instance, consider the term smart money in
reference to investment stock options. One would think the term
smart money would refer to a professional investor with incredible
talent for buying and selling investment stock options or a
fund manager, market strategist or analyst that has had consistent
success over different market scenarios, spanning many years
in the investment stock options
Or perhaps an trader/investor who has an intimate knowledge
of the investment stock options and has mastered the tools of
his trade, including technical and fundamental analyses, hedging
and option theory, and an expert knowledge of the global economy.
Wouldnt this definition be a better fit for the term smart
money? Maybe, but not in Wall Streets eyes. On Wall Street,
the term smart money refers to someone with privileged information,
who uses it to their advantage. This person, fund, or group
doesnt necessarily have any special ability, talent or expertise
when it comes to investment stock options.
They only know something that the public has not been made privy
to. They have a piece of insider information that they sometimes
use illegally to profit in investment stock options. It happens
all the time. So, on Wall Street, smart money is often synonymous
with cheating or illegal activity.
For many years, most professional traders and even individual
investors have studied long and hard in order to acquire skills
in investment stock options that would aid them in their quest
to be better, more competent at trading investment stock options.
However, not having access to the same level of information
as smart money sometimes puts the retail investor at an extreme
A person with insider information has a crystal ball. He knows
the outcome for investment stock options before trading has
even begun. The SEC has rules in place to try to prevent this
from happening but these rules havent eliminated the problem
because the SEC cannot always prove their case. Therefore,
there is still a lot of smart money out there when it comes
to investment stock options.
Most smart money investors who trade investment stock options
try to keep a very low profile for obvious reasons. The easiest
way for them to do this is in the investment stock options market
where there are fewer participants thus fewer eyes and ears
to notice any unusual trading.
Further, the investment stock options market offers much greater
leverage, allowing smart money to reap even greater rewards.
For example, If you knew that certain investment stock options
were going to report bad earnings, and you knew this ahead of
the market, it would be much cheaper and more profitable buying
puts in the investment stock options
market as compared to just
shorting the investment stock options.
This is exactly what happens, and it happens more than you think.
The game is always easier when you know the outcome before everyone
else, and these smart money players are out there making fortunes
in the investment stock options markets because they know what