The short answer
At most public companies, executives and directors are not allowed to trade the company’s stock in the weeks leading up to a quarterly earnings report. These quiet stretches are called blackout periods. Trading reopens shortly after results are public, during what is called a trading window. That is why most insider purchases and sales cluster in the weeks right after earnings.
A trade that appears just before an earnings report is unusual. Often there is a simple explanation, such as a pre-arranged trading plan. Occasionally it is the kind of trade that draws regulators’ attention.
Why blackout periods exist
Federal securities law prohibits trading on material non-public information, meaning facts a reasonable investor would consider important that have not been released. In the weeks before an earnings report, senior people at a company often know how the quarter went. Any trade they make in that period could look like it was based on that knowledge, even if it was not.
Companies protect themselves and their insiders by setting a calendar. No federal rule requires a specific blackout schedule. Each company writes its own insider trading policy. But the practice is widespread. A study by Bettis, Coles and Lemmon, “Corporate Policies Restricting Trading by Insiders” (Journal of Financial Economics, 2000), found that “over 92% of our sample companies have their own policies restricting trading by insiders” and “78% have explicit blackout periods.” They also found that blackout periods “successfully suppress trading, both purchases and sales, by insiders.”
How a typical calendar works
Policies differ, but they usually follow a pattern:
- The window opens a short time after earnings are released, often one to three trading days later, so the market has time to absorb the news.
- The window stays open for several weeks.
- The window closes some weeks before the end of the next fiscal quarter, as results start to take shape.
Research by Wayne Guay, Jae Kim and David Tsui, summarized on the Harvard Law School Forum on Corporate Governance, estimated windows from actual insider trades. They describe a typical window that opens “2-3 trading days after the previous quarter’s earnings release” and closes “approximately 2-3 weeks prior to the end of the next fiscal quarter,” leaving about six weeks of open trading.
Even during an open window, an insider may not trade if they know something important that has not been disclosed, such as a pending acquisition. Companies can impose special blackouts at any time for that reason. Many also require senior insiders to get pre-clearance from the legal department before every trade.
Since 2023, you can read the policy
Until recently, most companies did not publish their insider trading policies. That changed with the SEC’s December 2022 amendments to its insider trading rules. New Item 408(b) of Regulation S-K requires companies to disclose in their annual report whether they have adopted insider trading policies and procedures “reasonably designed to promote compliance with insider trading laws,” and if not, why not. Companies that have such policies must file them as an exhibit, usually numbered Exhibit 19.
This means you can now look up a company’s blackout calendar in its 10-K. The details vary a lot from company to company.
Why most insider trades come after earnings
Put the pieces together and the pattern is predictable. If insiders can only trade during a few weeks after each earnings report, their trades will bunch up in those weeks. When you see a wave of Form 4 filings in early February, May, August and November at a calendar-year company, the timing is usually the trading window opening, not a coordinated reaction to anything.
This matters when reading signals. A cluster buy, where several insiders buy within a short span, is more meaningful when it happens because insiders chose to buy, and less meaningful if it simply reflects everyone’s window opening at the same time. WallStPal’s cluster buy list and purchases page show the dates so you can compare them with the earnings calendar.
Bettis, Coles and Lemmon also found that “allowed insider trades are modestly more profitable than insider trades made during prohibited blackout periods.” Purchases made right after an earnings report, when the insider and the market have the same fresh information, can still carry a signal. Our guide on whether insider buying is a good signal covers the broader research.
When a trade happens close to earnings
If a Form 4 shows a trade a week or two before an earnings release, check these explanations first.
A 10b5-1 trading plan. Trades made under a Rule 10b5-1 plan were scheduled in advance, and company policies usually allow plan trades to continue during blackouts. Form 4 has a checkbox for plan trades, and since April 2023 filers must also give the plan’s adoption date. See our guide to 10b5-1 trading plans and WallStPal’s trading plans page.
An automatic transaction. Vesting of stock awards, shares withheld to pay taxes (code “F” on Form 4), and employee stock purchase plan buys often happen on fixed dates regardless of the earnings calendar. Our guide to Form 4 transaction codes explains each code.
A gift or estate transfer. Since April 2023, gifts of stock must be reported on Form 4 within two business days. They are not purchases or sales in the usual sense.
A different fiscal calendar. Some companies’ fiscal quarters do not line up with calendar quarters. Check the company’s actual earnings date before deciding a trade was close to it.
An insider who is not covered. A large outside shareholder who owns more than 10% of the stock files Form 4 but may not be bound by the company’s employee trading policy.
If none of these applies, and an officer made a large open-market trade shortly before a big earnings surprise, that is unusual. It does not prove wrongdoing, and you will only know about the surprise afterward, which is why the pattern cannot be used to predict anything. Regulators do look at this kind of timing.
How to check the timing yourself
You can line up an insider trade against the earnings calendar in a few minutes:
- Find the trade date. On Form 4, the transaction date is in Table I, column 2. The filing date can be up to two business days later, so use the transaction date.
- Find the nearest earnings dates. Companies usually announce results in a press release filed on Form 8-K under Item 2.02, “Results of Operations and Financial Condition.” The 8-K filing dates on EDGAR give you the exact days.
- Read the company’s policy. For fiscal years covered by Item 408(b), the 10-K’s exhibit list points to the insider trading policy, which usually states when the window opens and closes.
- Check the plan box and footnotes on the Form 4 before drawing any conclusion.
A purchase made a few days after an earnings release, during an open window, is the normal case. One made late in the quarter, outside a plan, is the case worth a second look.
Examples
Apple’s published policy, 2024. Apple filed its insider trading policy as Exhibit 19.1 to its fiscal 2024 annual report. It sets fixed restricted periods: for designated personnel, trading restrictions begin on December 1, March 1, June 1 and September 1, and end 24 hours after Apple publicly discloses that quarter’s results. Designated individuals must request pre-clearance at least two business days before a trade. The policy also lets employees trade under pre-approved 10b5-1 plans, with cooling-off periods at least as long as the SEC rule requires.
Gene Levoff and Apple, 2011 to 2016. Levoff was Apple’s director of corporate law and corporate secretary, and his job included notifying other employees when they could not trade before earnings. According to the U.S. Attorney’s Office for New Jersey, he reviewed draft earnings results before they were released and, from February 2011 to April 2016, bought Apple stock ahead of strong results and sold ahead of weaker ones, earning about $227,000 in profits and avoiding about $377,000 in losses. He pleaded guilty to securities fraud in June 2022. In July 2024 a federal court granted the SEC summary judgment in its civil case and ordered a civil penalty of $1,147,440, according to the SEC.
Explain it like I’m 13
Imagine your teacher grades the big test, and the students who help grade it are not allowed to make bets with classmates about the scores until the grades are posted. Once everyone can see the grades, the helpers can bet again, because now everyone knows the same thing.
That “no betting” stretch is a blackout period. The time after grades are posted is the trading window. If one of the helpers made a big bet the day before grades came out, people would want to know why.
Where the rule comes from
- SEC, Insider Trading Arrangements and Related Disclosures, Release 33-11138 (December 2022), which added Item 408(b).
- Regulation S-K Item 408, 17 CFR 229.408.
- Bettis, Coles and Lemmon, “Corporate Policies Restricting Trading by Insiders,” Journal of Financial Economics 57(2), 2000.
- Guay, Kim and Tsui, “Determinants of Insider Trading Windows,” summary on the Harvard Law School Forum.
This guide explains public filings and research. It is not investment advice.
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