Reading insider-trading data well is mostly about not being fooled by the easy stuff — treating every acquisition as a purchase, every sale as bearish, every buy as equally meaningful.
Six scenarios. For each, decide whether it is a strong signal, a weak one, or nothing, then check your reasoning.
A director buys 40,000 shares on the open market (code P) for about $900,000. It is their first purchase since joining the board four years ago, and it raises their personal holding from 12,000 shares to 52,000.
A CEO sells $6M of stock. The Form 4 has the 10b5-1 checkbox ticked, and a footnote says the plan was adopted 14 months ago.
An officer’s holding increases by 25,000 shares. The transaction code is A, and the price field is $0.00.
Five different insiders at the same company — three directors, the CFO, and a VP — each buy stock on the open market within the same eleven days.
An officer’s holding drops by 8,000 shares. The code is F, and a footnote mentions shares withheld to satisfy tax obligations on a vesting award.
A 10% owner — a quantitative fund — files its 60th Form 4 of the year, a $2M open-market purchase, one of dozens of similar-sized trades it makes across many companies every month.
The patterns behind the questions
Code before direction. An acquisition can be a purchase, a grant, an option exercise or an inheritance. Only the first is a decision to buy. If you answered based on "shares went up", the code was doing work you did not see.
Scheduled versus chosen. A sale under a plan adopted a year ago reflects a year-old decision. The 10b5-1 checkbox, or a footnote naming a plan, is the tell. Discretionary sales are a small and more interesting subset.
Size against the insider's own stake. A purchase that doubles someone's personal holding is a different statement from the same dollar amount against a position ten times larger. Absolute dollars are the wrong denominator.
Who is filing. A founder-CEO buying with personal money and a quant fund filing its sixtieth Form 4 of the year are both "insider buying" and are not remotely the same signal.
Independence. One insider buying is a data point. Five buying independently in a tight window is a cluster, and coordination or shared conviction is hard to fake.
The short version
High signal: an open-market purchase, discretionary, large against the insider's own stake, by an operating executive, ideally alongside others. Low signal: anything the company handed over as pay, anything on a schedule, anything tiny against a big position. Read the code first and the headline last.
Related: is insider buying a bullish signal? · scheduled plan or real signal? · what is a cluster buy?