Insider Trading Guide
How to read SEC Form 4 filings and use insider activity as a market signal.
Who Must File
Under Section 16 of the Securities Exchange Act of 1934, three groups are classified as corporate insiders and must report all transactions in company stock:
Filings are due within 2 business days of the transaction. Late filers must disclose the delay.
Transaction Types
Form 4 uses single-letter codes. We show only the two that matter for trading signals:
Open-market purchase using the insider's own cash. No ulterior motive — the insider is voluntarily adding risk. Historically the most reliable bullish signal in insider activity data.
Open-market sale. Insiders sell for many reasons: diversification, taxes, home purchase, divorce, charitable giving. A single sale is weak signal; clustered selling by multiple insiders is more meaningful.
We filter out all other transaction codes — awards (A), option exercises (M), tax withholding (F), gifts (G), and conversions (C/X) — because they don't reflect voluntary conviction about the stock price.
How to Interpret the Data
Insiders buy stock for one reason: they think it will go up. They sell for a hundred reasons. Weight purchases much more heavily than sales in your analysis.
One insider buying $50K is interesting. Three insiders buying within the same week is a strong signal. Filter by ticker and look for multiple filings in a short window — that's when the conviction is high.
A CEO buying 1,000 shares of a $2 stock ($2,000) is noise. A CEO buying 1,000 shares of a $200 stock ($200,000) is meaningful. The Value column shows dollar size — focus on trades above $100K for signal.
Officer buys (CEO, CFO) carry the most information — they know the business best. Director buys are strong too. 10%+ owner buys can be strategic (activist positioning, M&A intent) rather than fundamental conviction.
Most companies prohibit insider trading in the 30–60 days before an earnings announcement. Trades that happen just after a blackout lifts — especially buys right after a disappointing earnings reaction — tend to be high-conviction signals.
Many executives set up pre-scheduled 10b5-1 trading plans months in advance to sell shares on a fixed schedule. These automated sales show up as S transactions but carry no informational value. Look for Form 4 footnotes that say "pursuant to Rule 10b5-1 plan" — or use sells only as one of several confirming signals, not standalone.
Performance Columns
| Column | Definition |
|---|---|
| Base | Closing price on the transaction date (or nearest prior trading day if no close available) |
| D1% | Next trading day's close vs base — the immediate market reaction |
| D5% | 5th trading day's close vs base — one full week of price action |
| D20% | 20th trading day's close vs base — approximately one calendar month |
All performance is measured from the transaction date, not the filing date. There can be a 1–2 day lag between when a trade occurs and when it appears on EDGAR.