Which practice involves buying or selling a stock based on information that has not been made public?

• A. Market manipulation
• B. Short selling
• C. Insider trading
• D. Dividend capture

Answer: (C)

Trading on information that hasn’t been released to the public is insider trading. This happens when someone uses material information that could move a stock’s price once it’s public to buy or sell before others know it, giving them an unfair advantage and often breaking the law. For example, if a company is about to announce a major new contract or a bad earnings report, acting on that knowledge before the information goes public would constitute insider trading. The other activities involve different practices: market manipulation aims to move prices through deceptive actions, short selling bets that a stock will fall in price, and dividend capture aims to collect dividends around the ex-dividend date, none of which rely on nonpublic information.