Options and derivatives on Form 4
Table II of Form 4 reports options, warrants and other derivatives, which are rights to buy or sell shares later and not shares themselves. This site shows those rows as "Option / conversion" and leaves them out of every buy and sell total, because buying a put or selling a call is not buying or selling the stock.
In brief
- Table I = shares. Table II = options and other derivatives.
- An option exercise shows up twice: the option leaves Table II and shares arrive in Table I.
- A put bought is a bet on a fall; counting it as "buying" would be backwards.
- Derivative rows are listed in tables here but never added to buy or sell totals.
What is a derivative on Form 4?
A derivative is a contract whose value depends on the share price: an employee stock option, a warrant, a convertible security, a call or put bought on an exchange. Form 4 reports these in its second table, apart from ordinary shares.
For most executives the entries are employee options and similar awards: granted as pay (code A), later exercised (code M). For large holders such as hedge funds they can be exchange-traded puts and calls.
What does an option exercise look like?
Two or three rows filed together. In Table II the option disappears with code M. In Table I the same number of shares arrives, also code M, at the option's exercise price, which may be far below the market price. Often a code F or code S row follows, where shares are withheld or sold to cover tax and the exercise cost.
None of this is the insider deciding the stock is cheap. The option was granted years earlier and was about to expire or had vested.
Why are these rows kept out of buy and sell totals?
Because adding them would mislead in both direction and size. A fund that buys put options is positioned for the price to fall, yet the row is an "acquisition". A fund that sells call options has "disposed" of something without selling a share. Counting either as buying or selling the stock would turn the meaning upside down.
Size is the other problem. The dollar value of an option trade is the premium, not the value of the shares it covers, and some filers put the total for the row in the "price per share" box. Multiplying that by the number of contracts once produced a single row worth tens of trillions of dollars on this site. The rule now is: a derivative row is listed with its own value, labelled "Option / conversion" and flagged "derivative", and it is left off the trade map and out of every chart total.
Where can I still see them?
In the tables on each insider's and each stock's page, and on the map when you choose "All codes" for non-derivative rows. If a large holder is active in a company's options, the rows are there to read; they are simply not summed with share trades.
Questions and answers
What does Option / conversion mean on an insider's trades?
It marks a row from the derivatives table of Form 4, or an exercise or conversion of an option. These rows are listed but are not counted as buying or selling the stock.
Does exercising stock options count as insider buying?
No. An exercise converts an award granted earlier into shares at a preset price. It is reported with code M and is not an open-market purchase.
Why are insider option trades not in the buy and sell totals?
Because an option is not the stock. Buying a put is a bet on a fall and selling a call sells no shares, so adding them to buying or selling would misstate both direction and size.
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Not investment advice. This guide explains public records and how this site presents them. It makes no recommendation to buy or sell anything. All guides · All questions · Report an error