ABSTRACT
Trading shares is not, however, the only-or, even it now seems, the predominant-means of proting from inside information (Drummond 2007). An insider could equally, in terms of the above example, exploit the information in his or her possession by purchasing call options over shares in the takeover target. e leveraged nature of options makes this a more protable alternative for those engaged in insider trading and it is unsurprising that one of the three recent examples of insider trading mentioned in the Introduction to this book involved share options. Regulators have long been aware of the potential of share options to be used for insider trading and, accordingly, it is commonplace for trading in exchange-traded options over shares in takeover targets prior to the announcement of takeover bids to be subjected to the same level of regulatory scrutiny as the pre-bid trading of the shares themselves.
