That is not necessarily true. As an employee, you may be in a good position to judge whether a firm is likely to succeed, with perspectives not available to the market. This is why markets often react when CEOs buy/sell their own stock.
A CEO is an "insider" in market-speak. Jo(e) Engineer is just a punter like anyone else.
That's not strictly true. Depending on the company, it's very possible for mere engineers to have access to material non-public information. There's a reason many companies impose broad blackout dates on trading.
Mere engineers would be prosecuted long before CEOs for the totally-at-Justice-Dept-discretion crime of "insider trading".
That's self-evidently false. Engineers have insight into the internal culture of a firm and how it may differ from public perceptions, not to mention their own opinions on the quality of the back end technology and awareness of future plans or possibilities.
The average employee would be in a terrible position.
Ref: Enron.
The advantage of the employee isn't insider knowledge - it would be illegal to deal based on it - but understanding what the company does and which market it works in in the first place. This purely technical knowledge might give investment decisions some better factual support. But
Isn't it more likely that you don't know your employer as well as market analysts, but that you do have much more severe cognitive biases?
Sure, but until those options vest you’re still doubly exposed. I’m in this position right now. A fixed amount from my pay goes into buying options which vest in 3 years time. Fortunately I could afford to lose that money if it came down to it, but it’s a real issue and in a worst case scenario that’s money I might need. It’s certainly a consideration.
There's a reason you get a discount. Are employees who buy options generally unaware of the risks?
Investing in options that vest in three years. Hopefully you are part of a big stable corporation.
You'd be amazed how many people willingly keep large portions of their net worth invested in their employer.