Why most “insider buying” isn’t buying
A Form 4 reports an insider’s change in ownership of company stock, filed within two business days. It’s one of the timeliest signals in markets — and one of the most misread. The form tells you something changed; only the transaction code tells you whether the insider actually made a market trade or just received compensation.
The code is the whole story
A headline that says “insiders bought shares” is meaningless without the code behind it. A grant (A) and an option exercise (M/X) increase an insider’s holdings without a single share being bought on the market. Read those as purchases and you’ll badly misjudge conviction.
| Code | Meaning | Read as |
|---|---|---|
| P | Open-market or private purchase | Real buy |
| S | Open-market or private sale | Real sell |
| A | Grant, award, or other acquisition | Compensation |
| M / X | Exercise or conversion of a derivative | Not a market trade |
| F | Shares withheld to pay tax on vesting | Not a decision to sell |
| G | Gift | No sale |
The withholding trap, by the numbers
The same problem hits the sell side. When stock vests, companies automatically withhold shares to cover the insider’s tax bill — reported under code F. It looks like selling, but no one decided to sell. Across the last year of filings, roughly a third of insider “disposed” transaction lines are code F, not open-market sales. Lump them together and you overstate how much insiders are really unloading.
How BetterEDGAR handles it
BetterEDGAR lets you filter Form 4 activity by transaction type — isolating real purchases and sales from grants, exercises, and withholding — so you can look at what insiders actually chose to do. It also excludes superseded amendments by default, so corrected filings don’t double-count the same trade.
FAQ
- What is an SEC Form 4?
- A Form 4 is the filing an insider — a director, officer, or holder of more than 10% of the stock — submits to report a change in their ownership of the company’s securities. It is due within two business days of the transaction.
- Does an insider “buying” on a Form 4 mean they bought on the open market?
- Not necessarily. The transaction code is what matters. Code P is a real open-market purchase and S is a real sale, but A (a stock grant), M or X (an option exercise), and F (shares withheld for taxes) are compensation events, not discretionary trades. Reading a grant as a “buy” is a common mistake.
- How much of insider “selling” is actually just tax withholding?
- A lot. Across the last year of filings, roughly a third of insider sale-side (“disposed”) transaction lines are code F — shares automatically withheld to cover taxes when stock vests, not a decision to sell. Counting them as sales overstates how much insiders are actually unloading.
- Why do amendments matter for counting insider trades?
- A Form 4 can be amended (4/A), and a later amendment supersedes the earlier filing. If you count both, you double-count the same trade. BetterEDGAR excludes superseded amendments by default, with an option to include them.
SEC EDGAR is the official source of record for Form 4 filings. BetterEDGAR is an independent interface that links back to the original SEC documents. Back to all guides.