Insider sentiment

How to read them

Insiders receive most of their stock as pay, so they are net sellers in almost every week, and a week with more sellers than buyers says nothing by itself. The classic reading compares the sellers-per-buyer ratio with its own history and with the market: a low reading, or a reading that falls while the index falls, means insiders as a group are holding or adding; a high reading means they are taking money off the table faster than usual.

Sellers per buyer is the number of distinct officers and directors who sold, divided by the number who bought, per week, with the median of the complete weeks dashed. The second pane drops sales filed under a 10b5-1 plan, which were scheduled months in advance and carry no view on the price, so what remains is the discretionary decision of the people running the company. Companies buying per company selling counts companies rather than people, so one founder’s block sale weighs the same as any other seller.

Net buyers is buyers less sellers as a share of everyone who traded, from -100 (all sellers) to +100 (all buyers), on the officers-and-directors cut. Insider velocity is the change in that balance: the four-week average of net buyers less their 26-week average. It is positive when insiders have turned towards buying faster than their recent norm and negative when they have turned towards selling; the dashed bands sit one standard deviation from zero, so a reading beyond them is unusual for this window. The velocity series starts once a full long average exists.

People, dollars and companies are the raw counts behind the ratios: distinct buyers above the line and sellers below, dollars bought and sold, companies with at least one buyer and at least one seller, each half on its own scale because selling dwarfs buying. People count more than dollars for sentiment: one block sale can outweigh every other trade in a month, so the dollar panes are for scale. All insiders adds the 10% owners, funds and parent companies, whose trades are about their own portfolios. Weeks around a company’s earnings are quiet by rule, because insiders are barred from trading then.

The market line on every chart is S&P 500 (SPY), daily closes on the right-hand axis over the same window, so a run of selling can be read against what the index was doing at the time.