By the InsiderAlpha research team · Updated Jul 16, 2026 · Sourced from SEC EDGAR filings

Open-Market vs. Derivative Transactions

The single biggest source of confusion when reading a Form 4 is mistaking a routine compensation event for a conviction trade. The form's two tables — and the one-letter transaction codes — tell you which is which.

Table I — non-derivative securities

This is ordinary common stock. The transactions that matter most live here:

P (open-market purchase) — the insider spent their own cash to buy shares on the market. This is the gold-standard bullish signal.
S (open-market sale) — a sale of common stock; read it with the caveats in our insider-selling guide.
A (award/grant) — stock handed over as compensation. No conviction signal — the insider didn't choose to buy.

Table II — derivative securities

Options, warrants, RSUs, and convertible instruments. The common codes:

M (exercise/conversion) — converting options into shares. Often paired the same day with an S (sell to cover the strike price and taxes). An M+S combo is a mechanical compensation event, not a bearish sale.
F — shares withheld to pay taxes or the exercise price; pure plumbing.
A / D in Table II — derivative grants or dispositions.

The mental model

Ask one question: did the insider voluntarily spend money to increase their economic exposure? Only an open-market purchase (P) clears that bar unambiguously. Awards, exercises, and tax-withholding events are compensation mechanics that happen on a schedule the insider doesn't fully control.

How InsiderAlpha handles it

Our scoring isolates open-market P purchases, sizes them against the insider's role and pay, and discounts or ignores derivative and award activity — so the signal you see reflects conviction, not payroll.

Form 4 transaction codes in full → · See this week's open-market buys →

Open-Market vs. Derivative Transactions

Table I — non-derivative securities

Table II — derivative securities

The mental model

How InsiderAlpha handles it

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