When a director, an officer or anyone who owns more than 10% of a company trades its stock, they have two business days to report it on a Form 4. That makes insider trades some of the freshest ownership data the SEC publishes.
But many Form 4s aren’t a decision to buy or sell at all. Every transaction carries a one-letter code, and that letter is the first thing to read.
Buy
Bought shares on the open market or in a private deal.
Sell
Sold shares on the open market or in a private deal.
Exercise
Exercised options or converted a similar award into shares.
Grant
Got shares or options from the company, usually as pay.
Tax withholding
Gave shares back to cover tax or an option’s exercise price.
Gift
Gave shares as a gift, or received one.
Why buys get the attention
There’s an old line, often credited to Peter Lynch: insiders sell for many reasons, but buy for only one. A sale might pay for a house or a tax bill. An open-market purchase means someone with a close view of the business spent their own cash on its shares.
Read the letter before you read the dollar amount.
Planned sales
Many executives sell on a schedule set in advance under a Rule 10b5-1 plan. Directors and officers must wait at least 90 days after adopting a plan before it can trade, and since April 2023 the Form 4 has a box that flags these trades. A sale booked months ago says much less than one decided last week.
Clusters say more than one-offs
One purchase can be noise. Several insiders at the same company buying within a few weeks of each other is harder to ignore, especially when it’s the people closest to the numbers, like the CEO and CFO.