Open Market Purchase
An open market purchase occurs when an insider buys company stock on a public exchange (NYSE, NASDAQ, etc.) at the current market price, just like any other investor. This is transaction code "P" on Form 4 filings.
The Trader's Take
The Signal
Open market purchases are among the strongest bullish signals. When executives buy with their own money at market prices, it demonstrates genuine conviction about the company's future.
The Noise
Small purchases for tax-loss harvesting or portfolio rebalancing are less meaningful than large purchases that increase position size significantly.
Actionable Insights
- 1Focus on purchases that increase the insider's total position by more than 10%.
- 2Compare the purchase price to recent trading ranges—buying near 52-week highs is more significant.
- 3Look for cluster buys where multiple insiders purchase within the same month.
Regulatory Context & Context
Common Misconceptions
Not all purchases are "open market"—some are grants, exercises, or other transaction types.
The size of the purchase matters more than the dollar amount—percentage of position increase is key.
Frequently Asked Questions
What transaction code indicates an open market purchase?
Transaction code "P" on Form 4 indicates an open market purchase.
How quickly must open market purchases be reported?
Form 4 must be filed within two business days of the transaction.