Benzinga | Sep 1, 2020 11:22AM EDT

Insider Buys Tonix Pharmaceuticals's Stock

A Form 4 filing filed with the SEC on Tuesday, September 1 showed that Treco James bought 5,500 shares of Tonix Pharmaceuticals Inc (NASDAQ:TNXP) at an average price of $0.89. The transaction moved the executive's stake in Tonix Pharmaceuticals Inc. to 10,000 shares. Tonix Pharmaceuticals was trading 4.2% lower from the previous closing price.

The Importance of Insider Transactions

Insider transactions shouldn't be used primarily to make an investing decision, however an insider transaction can be an important factor in the investing decision.

When an insider buys stock after an important sell off, that can indicate the insider's faith in the success of the organization. Henceforth, if the stock is bought at new highs, it might be because the insider feels that the stock is not overvalued. Conversely, insiders who are selling stock at new lows can potentially indicate some kind of capitulation moment. Insiders selling at new highs can indicate that exec wants to "take some profit" and "lock in a gain."

Transaction Codes To Focus On

Wall Street tends to focus on insider transactions which take place in the open market, viewed inside a Form 4 filing via codes P for purchase and S for sale. An open-market transaction means the insider went into the market of their own volition and made an active decision about the potential path for a company and its stock moving forward.

Transaction codes other than P or S are often viewed with less conviction as they are often not tied to a decision by the exec. As an example, transaction code C indicates the conversion of an option. Transaction code A indicates the insider may have been forced to sell shares in order to receive compensation the exec was promised upon being hired by a company.