Direxion Shares, the fund group known primarily for its leveraged ETFs, is moving into more buy-and-hold strategies.

And the firm is doing it first by launching 2 ETFs that use variants on Sabrient’s Insider Sentiment Index.  Direxion announced that it was floating 2 funds:

  • Direxion Large Cap Insider Sentiment Shares (NYSEArca: INSD)
  • Direxion All Cap Insider Sentiment (NYSEArca: KNOW)

You can see the prospectus for both funds here.
These two funds join Guggenheim’s Insider ETF ($NFO) — also powered by Sabrient’s Insider Sentiment Index.

Using Insider Trading Data to Invest

Insider Trading is a popular subject for me at Tradestreaming.  I dedicated an entire chapter of my book,
backtested results of sabrient insider trading index Tradestream your Way to Profits to the subject.  Insiders consistently outperform the markets — some studies saying by as much as 7% (check out my Insider Trading Dashboard for more about this strategy).

The recent report on Congress’ insider trading activity additional additional spotlight to the fact that many investors perform extremely well employing legal(at least, so far) insider information.
Sabrient has been pivotal in creating and marketing its indices to the retail investor.  Its Insider Sentiment index is comprised of 100 stocks and is quant weighted — overweighting the largest holdings a bit and underweighting the bottom 50 according to a balancing schedule.

How has NFO performed so far

While this is Direxion’s first foray into the insider trading strategy, Claymore/Guggenheimperformance of the claymore/sabrient insider trading etf and Sabrient have been running $NFO since late 2006 — so there’s some actual performance.
And performance looks good — where the S&P was -4% during the fund’s lifetime, the Claymore/Sabrient Insider Trading ETF has returned +28%.


The thing is, there are always investors with better information than others.  Insider trading strategies identify these investors (corporate insiders, in this case) through public disclosures.

By plugging into the Tradestream, following, mimicking, and creating strategies off of the activities of in-the-know investors, we can all profit.

I expect to see more ETF activity and retail strategies that use insider trading information.  Keep an eye out for me as I’m working on my own information product to help investors decipher insider trading data.

More on that later.

Are you using insider trading strategies as part of your investing?