What is "insider trading"?

Insider trading is defined as the illegal buying or selling of securities based on non-public, material information. Material information is any information that could influence an investor’s decision to buy or sell a security. When an individual utilizes this privileged, confidential information for trading purposes, it undermines the integrity of the financial markets and creates an unfair advantage, as the information is not accessible to the general investing public. This practice is illegal and regulated by government authorities to maintain fairness in the securities markets.

Understanding insider trading is crucial as it highlights the importance of ethical conduct in financial transactions and reinforces the concept of fairness in trading practices. The other options refer to legal trading practices using publicly available information, which does not violate any securities laws and emphasizes the distinction between ethical and unethical trading behaviors.