Insider buying screener: how to read Form 4 purchases
Company insiders have to report their trades, and the reports are public. That makes insider buying a popular thing to screen for. It is also easy to screen badly. This guide covers what a Form 4 contains, which entries are worth separating out, how to design a sensible filter, and what the result can and cannot tell you. It is education about a public record, not a view on any company.
Key takeaways
- Only transaction code P is an insider paying for shares; grants, option exercises and tax withholding carry other codes.
- A Form 4 is due before the end of the second business day after the trade, so the filing date is the date the information became public.
- A list of purchases is a list of facts, not a forecast, and a screen is not a strategy.
What a Form 4 is
Officers, directors and holders of more than 10% of a company's shares report purchases, sales and holdings on SEC Forms 3, 4 and 5 (SEC Investor Bulletin: Insider Transactions and Forms 3, 4, and 5). A Form 4 must be filed within two business days following the transaction date; the form's own instructions say before the end of the second business day after the transaction was executed (SEC Form 4 and instructions). The forms are free on EDGAR. Each one lists the person, their relationship to the company, and one or more lines of transactions with a date, price, number of shares and a one-letter code. Some small transactions are reported later on a Form 5, which is generally due 45 days after the company's fiscal year ends.
The codes that matter
The SEC's bulletin and the Form 4 instructions list the transaction codes. The ones most screens meet:
- P: an open market or private purchase. This is the one most screens are looking for.
- S: an open market or private sale.
- A: a grant, award or other acquisition from the company. No one chose to spend their own money.
- M: exercise or conversion of an option or other derivative security.
- F: payment of an exercise price or tax liability using part of the securities received from the company.
- G: a gift of securities by or to the insider.
A screen that counts "insider buys" without separating P from A, M and F is mostly counting compensation. That is the single most important filter to get right.
Why purchases get attention, and why not to over-read them
The SEC notes that insiders may sell for any number of reasons, including liquidity and diversification, and that many investors believe insider purchases and sales can say something about insiders' views of the company's prospects (SEC Investor Bulletin). A purchase with their own money usually has fewer explanations than a sale, which is why open-market purchases are watched. It is not evidence that the person is right. Insiders can buy early, can be wrong about their own company, and can buy small amounts for appearance. Nothing in the form tells you the reason.
Pre-arranged trading plans, known as 10b5-1 plans, also matter. Form 4 carries a check box for trades made under a contract, instruction or written plan intended to satisfy Rule 10b5-1(c), with the plan's adoption date in the explanation, and the SEC required the check box for reports filed on or after April 1, 2023 (SEC Release 33-11138). A planned purchase was scheduled earlier, so its timing says less about a fresh decision than a discretionary one.
Designing a filter
- Code P only, from the transaction table for non-derivative securities (Table I).
- A minimum size. A few thousand dollars from a wealthy director is noise. Compare the amount with the person's existing holding where the form shows it.
- Several insiders in a short window. Distinct people buying in the same weeks is a different pattern from one person buying once.
- Role. Decide whether you weight chief executives and finance chiefs differently from outside directors, and write the rule down.
- Read the footnotes. They explain indirect ownership through trusts, plan trades and unusual prices.
Pitfalls
- Dates. A trade has a transaction date and a later filing date. Anything you test can only use what was public on the day, which is the filing.
- Amendments. A Form 4/A can correct an earlier form. Count each trade once.
- Price context. A purchase after a large fall and one after a large rise are different situations even though the form looks the same.
- Small samples. A handful of events can tell you almost nothing about whether a rule works.
Reading one entry, step by step
Here is an invented line from a Form 4, with every field explained. The security is common stock. The code is P. The amount is 5,000 shares at a price of 12.40, and the form shows 45,000 shares owned after the transaction, held directly. Reading it: the person bought 5,000 shares worth about 62,000 in total, and that took their direct holding from 40,000 to 45,000, an increase of one eighth. Whether 62,000 is meaningful depends on the person. For someone with a modest salary it is a serious commitment; for a long-serving founder holding millions of shares it may be a rounding error. The same line also needs a date check: the trade may be two days older than the filing, and the price may have moved since.
Questions to put to any list of purchases
- Is each line really code P, and does it come from the non-derivative table?
- How large is the purchase compared with the person's holding and with the stock's normal daily volume?
- Is it one person or several, and over what period?
- Did a plan or a company-wide programme (such as a share purchase scheme) generate it?
- What did the company file around the same time that could explain the timing?
What the result is
A list of insider purchases is a list of public facts: who bought, how much, at what price and when. It is not a forecast, and a screen is not a strategy. If you want to know whether a rule such as "several insiders buy within a month" has ever been useful, that is a testing question, and it needs costs, point-in-time dates and out-of-sample data before the answer means anything.
Where this fits
The TellHawk Terminal shows insider Form 4 trades for a company with the source and date on each block, and this week's filings lists large open-market insider purchases the pipeline surfaced, dated and sourced. To test a rule on history without peeking, the Strategy Lab counts a filing only from the day after it was filed.
Sources checked
Primary sources, retrieved on 2026-10-12. Check the current form instructions before relying on a detail.
- SEC Investor Bulletin: Insider Transactions and Forms 3, 4, and 5 (who files, deadlines, transaction codes)
- SEC Form 4 and general instructions (second business day, codes, Rule 10b5-1(c) indication)
- SEC Release 33-11138 (Rule 10b5-1 check box compliance date)
- SEC: Search filings (EDGAR)