My Strategy for Using AI to Track Insider Trading on Small Cap Stocks

The Setup

Multiple company executives significantly increasing their positions within a similar time frame is one of the cleanest signals you can get — but only if you filter the noise. This is the exact 4-step framework I run on every Form 4 filing window: scan, survivability-gate, score, and only then build a trade.

What the AI Found

1. 1.Step 1 — Scanned SEC Form 4 Code P open-market purchases under $500M market cap, requiring 2+ unique insiders within 30 days, purchase size material to comp (5-10%+) or position increase ≥10%, and stripped out routine same-quarter buyers.
2. 2.Step 2 — Ran a survivability gate on the candidates: Altman Z-score ≥ 1.81, current ratio ≥ 1.0, and rejected anything with >30% debt maturing in 12 months on below-investment-grade credit.
3. 3.Step 3 — Scored every survivor with a 5-component conviction model (purchase quality, cluster strength, contrarian analyst layer, price context, earnings proximity). SDHC came back at 90/100 — the highest-conviction signal in the screen, with 4 unique insiders all buying within 7 days of each other.
4. 4.Step 4 — On the top name, found the nearest swing low and built an exact trade plan: entry, GTC stop-loss, scaled target around the 30-day high, and a trailed runner. The realized leg shown above was a $0.19 cost-basis call position that ran to $1.10 — +478% / +$2,730.

The Trade

Common stock buy on the highest-conviction insider cluster, stop-loss at the nearest swing low, scale half off when price hits the 30-day high, trail the rest at entry to lock in a risk-free remainder. Optional call leg for asymmetric upside on the same setup.

The Result

Insider clusters on small caps are one of the few edges retail still has, because big funds can't build meaningful positions in sub-$500M names. The whole pipeline runs in one Xynth conversation every morning — you only get 1-2 viable candidates every 2-3 weeks, but the hit rate is high when the filters all stack.

The Prompt

Scan SEC form 4 filings for open-market stock purchases. Only look for transaction Code P. Then filter for the following:

- Stocks under $500M market cap
- Purchases from a company executive (CEO, CFO, etc) that exceed 5-10% of the person's annual compensation (salary + bonus + stock awards), or purchases that increase the executive's position by 10%+
- 2+ insiders purchasing within 30 days of each other
- Reject any routine purchases (same calendar quarter purchases in prior years)

Then survivability-gate the candidates: Altman Z-score above 1.81, current ratio above 1.0, and reject if more than 30% of debt matures within 12 months on a below-investment-grade rating.

Score the survivors on a 5-component conviction model (purchase quality, cluster strength, contrarian analyst layer, price context, earnings proximity). Take the highest-scoring name and check for the nearest swing low. Suggest an exact trade I can execute with entry, stop, and target.