What happens to the insider trade profits?
I have noticed that David Solomon has made an insider trade on Goldman Sachs as shown in this screenshot from marketwatch.com:
Now This tells me he got a profit of over 2.5 million dollars in a day trade. I have two questions:
Is my understanding correct?
What do executive directors usually do with such profit? Is it understood that such trade profits should be re-invested back to the company?
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You seem to have a little confusion over terminology that should be cleared up:
You are calling this "day-trading"
Day-trading is the term for performing multiple trading actions in a single day. While it appears that the COO has performed a buy and a sell on the same day, most people would consider this a 'single trade'. In reality, it seems that the COO had 'stock options' [a contract providing the option for the holder to buy stock at a specific price, at some point in the future], provided as part of his compensation package. He decided or was required to 'exercise' those options today. This means he bought the shares using his special 'option price'. It is extremely common for employees who exercise stock options, to sell all of the resulting stock immediately. This is very different from usual day-trading, which implies that he would have bought stock in the morning at a low price, and then sold it later at a high price.
You are calling this 'insider trading'. That term specifically often implies some level of unethical behavior. In general, stock options offered to executive employees are strictly limited in how they can be exercised. For example, most stock option plans require employees to wait x number of years before they can exercise them. This gives the employee incentive to stay longer, and for a high-level executive with the ability to strongly impact company performance, it gives incentive to do well. Technically you are correct, this is likely considered an 'insider trade', but given that it seems to have been a stock option exercise, it does not necessarily imply that there was any special reasoning for why he did the trade today. It could simply be that today was the first day the stock option rules allowed him to exercise.
As to your final question - no, these profits are the COO's, to do with as he likes.
Is my understanding correct?
It's actually higher than that - he exercised options for 94,564 shares at 4.16 and sold them for 2.17 for a gain of about .5 Million. There's another transaction that's not in your screenshot where he sold the other 7,954 shares for another Million.
What do executive directors usually do with such profit?
It's part of his compensation - it's anyone's guess what he decided to do with it.
Is it understood that such trade profits should be re-invested back to the company?
No - that is purely compensation for his position (I'm assuming the stock options were compensation rather then him buying options in the open market). There generally is no expectation that trading profits need to go back into the company. If the company wanted the profits reinvested they wouldn't have distributed the compensation in the first place.
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