Path 03 · 5 min read
How an insider buy actually works
An open-market insider buy is one of the few signals that's hard to fake — the buyer is risking real money and is required to disclose it quickly. But not every transaction labelled 'insider' deserves the same weight.
Four entries cover what to look at, what to discount, and where to check.
Start with the document — every insider trade lives on the same form.
01Form 4
A filing required within two business days when a company insider — exec, director, big shareholder — buys or sells shares.
Form 4 is the SEC filing that company insiders use to report their personal trades. By rule, it must be filed within two business days of the trade.
Open-market insider buys are usually the strongest insider signal — insiders sell for many reasons (taxes, diversification, plan triggers) but typically only buy when they expect the price to rise.
The kind of trade that matters most.
02Insider buy
A company insider buying shares with their own money on the open market — historically one of the stronger bullish tells.
And the fine print most people miss — not every sale is a vote.
0310b5-1 plan
A pre-set sale schedule insiders adopt to sell stock on autopilot. Distinguishes routine sales from conviction-driven ones.
A 10b5-1 plan lets insiders pre-commit to a schedule of sales (or, less commonly, buys) at fixed prices or dates — set up while they don't have material non-public information.
When the plan triggers a sale weeks or months later, it doesn't signal anything new about the insider's view. We mark plan-driven sales separately from discretionary ones so neither gets mistaken for the other.
Worth knowing one more filing type that often shows up alongside.
048-K
An out-of-cycle disclosure filed when something material happens — an acquisition, a CEO change, a major contract win or loss.
Rule of thumb: open-market insider buys are signal, plan-driven sales are noise, and discretionary sales sit somewhere in between.
Quick check
Did it stick?
3 questions · pass at 3/3.
1. A Form 4 must be filed within…
2. A sale executed under a 10b5-1 plan tells you…
3. An open-market insider buy is usually the strongest insider signal because…