Benzinga | Sep 10, 2020 11:24AM EDT

GigaMedia Shares Moving After An Insider Files A SEC Form 4

A Form 4 filing filed with the SEC on Thursday, September 10 showed that CEO Huang Cheng-Ming bought 11,267 shares of GigaMedia Inc (NASDAQ:GIGM) at $2.70 on Friday, Sep 04, bought 50,000 shares at $2.90 on Tuesday, Sep 08, and bought 7,470 shares at $2.91 on Wednesday, Sep 09. The transaction moved the executive's stake in GigaMedia Inc. to 994,526 shares. Shares of GigaMedia moved lower by 1.7% from the previous closing price.

The Importance of Insider Transactions

While transactions from an insider shouldn't be used as the sole item to make an investment or trading decision, an insider buying or selling stock in their company can be a good added factor that leads to more conviction in a 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. If the transaction was an open-market transaction, that means that the insider made a concious decision for the company's stock moving forward.

Transaction codes besides P or S aren't relatively important as they are seldom tied to a decision by the executive. For example, transaction code A is indicative of an insider being forced to sell shares to attain compensation. Moreover, transaction code C indicates the conversion of an option.