Transaction Code M

Marcus Thorne

Last Updated: January 5, 2026

Plain English Definition

Transaction Code M on Form 4 indicates the exercise of a derivative security, typically stock options. This is when an insider converts options into shares, which may or may not indicate positive sentiment depending on whether they hold or sell.

The Trader's Take

The Signal

Code M exercises can be neutral to slightly positive if the insider holds the shares, or neutral to negative if they immediately sell. The key is whether the insider retains the shares after exercise.

The Noise

Many Code M exercises are routine option exercises that don't indicate strong sentiment either way, especially if part of a 10b5-1 plan.

Actionable Insights

1
Check if Code M exercises are followed by Code S sales—immediate sales are less positive.
2
Code M exercises where insiders hold the shares can be slightly positive signals.
3
Large Code M exercises can indicate insiders believe the stock will appreciate.
4
Distinguish Code M from Code P—exercises use existing options, purchases use new capital.

Regulatory Context & Context

Transaction Code M is used on Form 4 filings to report the exercise of derivative securities like stock options. These transactions must be reported under Section 16 requirements and may trigger tax withholding (Code F) if applicable.

Common Misconceptions

Code M exercises don't necessarily mean the insider is buying—they're converting options to shares.

Exercising options doesn't require new capital investment like Code P purchases do.

The decision to exercise options may be driven by expiration dates rather than sentiment.

Frequently Asked Questions

What does Transaction Code M mean?

Transaction Code M indicates the exercise of a derivative security, typically stock options, where an insider converts options into shares.

Are Code M exercises bullish or bearish?

Code M exercises are generally neutral. They become slightly positive if the insider holds the shares, or neutral/negative if they immediately sell them.