Open Market Transactions
Every insider transaction made has a transaction code attached to it. The transaction code specifies what type of transaction took place; award, gift, option conversion, open market, etc.
Open market transactions are those in which the insider bought or sold shares at market value. These are denoted with a transaction code of "P" - purchase or "S" - sale.
These often get the most attention when analyzing insider trading patterns because they reflect an action taken directly by the insider. When an insider makes the decision to buy or sell their shares at the a fair market value, they could be showing a glimpse into how they feel about the value of their shares and the future of the company.
Most of us have heard some version of “Insiders buy for one reason, they think the price is going to go up”. We are really only talking about open market transactions in this case. Thousands of Form 4 transactions are happening all the time but the majority of the insights and analysis will come from open market transactions.
While open market transactions are generally the most insightful, there is still value to be had from every other type of transaction. Sometimes you will find an insider will sell off a bundle of shares but after looking at it you will see that they had just acquired that same amount through options converting. In this case, they have not really decreased their holdings in the company and the level of insight from the sell off is likely not as strong of a signal that if they had not acquired shares from something other than an open market transaction.