Baked In The Cake


DEFINITION of 'Baked In The Cake'

Projections, expectations and other news items that are already reflected in a security’s price. As a phrase, "baked in the cake" is used to indicate that something has already been taken into account, and that an investor just learning of the news is unlikely to be at an advantage by acting on it.

BREAKING DOWN 'Baked In The Cake'

Investors who try to profit from breaking news must answer a difficult question: How many other investors have already acted on the news? This fundamental issue is related to insider trading and asymmetric information. In order to profit from breaking news, an investor has to be one of the first to hear of it. Once a critical number of investors have traded on an earnings estimate, for example, the news will be considered baked in the cake.

Investors should be careful when it comes to what news they trade on, and where that news is coming from. The advent of the Internet has increased the availability of information, but the source and veracity of the information found on the Internet is difficult to ascertain. For example, if an investor is told material, non-public information by an employee of a company, trading that company’s shares may lead to an investigation by the SEC.

  1. Insider Trading Sanctions Act Of ...

    Legislation that allows the SEC to seek a civil penalty, of up ...
  2. Insider Buying

    The purchase of shares of stock in a corporation by someone who ...
  3. Insider Information

    A non-public fact regarding the plans or condition of a publicly ...
  4. Material Insider Information

    Material information, about certain aspects of a company, that ...
  5. Asymmetric Information

    A situation in which one party in a transaction has more or superior ...
  6. Novation

    1.The act of replacing one participating member of a contract ...
Related Articles
  1. Investing Basics

    The Insiders Who Fix Rates for Gold, Currencies And Libor

    The system by which benchmark rates are fixed for interest rates, currencies and gold is archaic - and, many would argue, deeply flawed.
  2. Investing

    U.S. Government Cracks Down On Insider Trading

    The FBI is taking an interest in some shady dealings in the upper echelon.
  3. Markets

    The Truth About Insider Trading

    Allowing insider trading to go unchecked could hurt confidence in the system enough to hinder the economy in general.
  4. Markets

    Infamous Insider Traders

    Check out these bizarre insider trading cases that helped define the SEC's laws against it.
  5. Investing Basics

    What are the fiduciary responsibilities of board members?

    Find out what fiduciary duties a board of directors owes to the company and its shareholders, including the duties of care, good faith and loyalty.
  6. Investing News

    What Affirmative Action Means for Businesses

    A look at what Affirmative Action means for your business.
  7. Investing

    Protect Your Creations--Register Your Trademark

    Federally registering your brand name or logo offers the broadest protection against potential trademark infringement.
  8. Professionals

    What Financial Advisors and Brokers Need to Know About Rule 407

    Learn about NYSE Rule 407 and how it may impact you as a financial advisor or investment broker. What you don't know about this regulation can hurt you.
  9. Entrepreneurship

    Hiring? Regulations Small Businesses Need to Know

    When a small business becomes an employer, it has new responsibilities. Make sure you familiarize yourself with regulatory requirements.
  10. Investing Basics

    Top 3 Most Scandalous Insider Trading Debacles

    While insider trading is often difficult to spot, there have been plenty of egregious examples in history that were fairly simple to detect.
  1. What exactly is insider trading?

    An "insider" is any person who possesses at least one of the following: 1) access to valuable non-public information about ... Read Full Answer >>
  2. Are UTMA accounts escheatable?

    Like most financial assets held by institutions such as banks and investment firms, UTMA accounts can be escheated by state ... Read Full Answer >>
  3. Can the IRS audit you after a refund?

    The U.S. Internal Revenue Service (IRS) can audit tax returns even after it has issued a tax refund to a taxpayer. According ... Read Full Answer >>
  4. How does escheatment impact a company?

    In recent years, state governments have become increasingly aggressive in enforcing escheatment laws. As a result, many businesses ... Read Full Answer >>
  5. What happens if property is wrongfully escheated?

    If your financial accounts, such as bank, investment or savings accounts, are declared dormant and the managing financial ... Read Full Answer >>
  6. How do financial advisors help you avoid escheatment?

    Financial advisors can help you avoid the escheatment of your financial assets by regularly reviewing all of your accounts, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center