GLOSSARY // Fundamentals
Form 4
A Form 4 is the SEC filing corporate insiders must submit within two business days of buying or selling their company's stock. It covers Section 16 insiders: officers, directors, and holders of more than 10% of the shares.
The transaction code on the form does most of the work. Code P is an open-market purchase with the insider's own money, the strongest signal on the form. Code S is a sale, code A is a grant or award, and code M is an option exercise. Sales are noisy because insiders sell for taxes, houses, and diversification, often on prescheduled 10b5-1 plans; open-market buys have exactly one motivation. StockTools tracks insider filings free, filterable by transaction code.
A CEO files a Form 4 showing a code P purchase of 25,000 shares at $18.40, about $460,000 of personal money, two weeks after the stock fell 30% on an earnings miss. Cluster that with two directors buying the same week and you have the classic insider-buying setup: the people with the best information paying open-market prices after a drawdown.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.