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Insider trades reported on SEC Form 4: when the people who run a company buy or sell its shares with their own money.
How to read it
- Form 4
- The form a company insider (officer, director or owner of more than 10%) must file with the SEC within two business days of buying or selling the company's shares.
- Buy (P) and Sell (S)
- Open-market purchases and sales. Gifts, option exercises and automatic tax withholding are left out because they say little about what the insider thinks.
- Value
- Shares times price, as reported on the filing.
- 10b5-1
- A trade made under a plan set up in advance. Planned sales are common and usually say less than an unplanned purchase.
- Late filing
- A Form 4 filed more than two business days after the trade.
- Vs. S&P 500
- How the stock did after the trade minus how the overall market did in the same weeks.
A real example
In January 2016, when bank stocks were falling, JPMorgan Chase CEO Jamie Dimon bought 500,000 JPMorgan shares with his own money, worth about $26 million. His Form 4 made the purchase public within days, and investors read it as a strong sign of confidence.
Explain it like I'm 13
If the coach of a team bets his own allowance that his team will win, that tells you something. A Form 4 is the note a company boss must hand in whenever he buys or sells his own company's shares, so everyone can see it.
Data from public SEC filings and congressional reports. Information, not investment advice. Check every number against the filing linked on the page.
WallStPal Insider Sentiment Index
Of the company insiders who traded their own stock on the open market each week, the share who bought. 50 means as many buyers as sellers. Planned 10b5-1 sales are left out.
This week 117 insiders bought and 84 sold. The index is well above its one-year average: insiders are buying more than usual.
Four-week average: 50. One-year average: 42.
How the index works
Each week we count the insiders (officers, directors and 10% owners) who reported an open-market purchase or sale of their own company's stock on SEC Form 4, by trade date. The index is buyers divided by buyers plus sellers, times 100. Each person counts once per company per week, however many trades they made. Sales marked as made under a Rule 10b5-1 plan are excluded, and weeks with fewer than 20 insiders trading are skipped.
Insiders sell far more often than they buy, for taxes, diversification and planned sales, so the index usually sits well below 50. What matters is how it compares with its own history: a reading well above the one-year average means insiders as a group are buying more than usual.
Explain it like I'm 13
Imagine asking all the teachers at many schools whether they bought or sold their school's trading cards this week. If most of them bought, they probably feel good about their own schools. This index is the share who bought. It doesn't predict the future, but it shows how the people with the most inside knowledge are acting right now.
Not investment advice. Source: SEC Form 4 filings. Sectors from the SIC industry code on file with the SEC.