Legal Insider Trading
Corporate insiders (executives, directors, major shareholders) can legally buy and sell their company stock, but must report these trades to the SEC within two business days.
Why Insider Activity Matters
- Insiders know the business better than anyone
- Insider buying is often bullish (using their own money)
- Cluster buying by multiple insiders is especially significant
Interpreting Insider Sales
Insider selling is harder to interpret because insiders sell for many reasons:
- Diversification (too much wealth in one stock)
- Tax planning
- Personal expenses (homes, college, etc.)
- Prearranged 10b5-1 plans
Form 4 Filings
All insider trades are reported on SEC Form 4, available at sec.gov. Key information:
- Transaction type (purchase, sale, option exercise)
- Number of shares and price
- Insider title and total holdings
Where to Track Insider Activity
Many financial websites aggregate insider trading data. Look for recent clusters of buying, especially by multiple insiders or board members.