Blackout period

A blackout period is a stretch of time during which a company's insider trading policy prohibits directors, officers and designated employees from buying or selling the company's securities, typically because they are likely to have access to unreleased financial results. The opposite is an open trading window.

How it works

Blackout periods are set by each company, not by a single SEC rule, so the timing varies. A common pattern:

• Closes: a few weeks before the end of each fiscal quarter, when preliminary numbers start circulating internally.
• Reopens: one to two full trading days after the earnings release, giving the market time to absorb the news.
• Event-specific blackouts: companies can impose ad hoc blackouts around pending deals, clinical data or other material developments, often without announcing them.

Trades under a Rule 10b5-1 plan adopted earlier can continue during a blackout, which is a main reason plans exist. Many companies also pause or shift share buybacks to 10b5-1 programs during these periods.

A separate, legally defined blackout applies to retirement plans: under Regulation BTR, when a 401(k) or similar plan freezes participant trading, directors and executive officers are generally barred from trading company stock as well.

Why it matters for traders

Blackout timing explains why insider buying clusters in the days and weeks after earnings: that is when the window opens. A purchase made right as the window opens, after the numbers are public, suggests insiders view the price as attractive in light of results. Conversely, an insider trade during what should be a blackout warrants a look at whether it was a plan trade or an exempt transaction.

Example

Harbor Freightline (ticker HRBF) closes its trading window on the 15th day of the last month of each quarter. Its fiscal Q3 ends September 30, so the window closes September 15. HRBF reports earnings on Tuesday, October 27, before the open, and the window reopens after two full trading days, on Thursday, October 29.

FAQ

Can insiders buy stock during a blackout period?

Generally not, except through a previously adopted Rule 10b5-1 plan or certain exempt transactions.

Is a blackout period required by law?

Most are set by company policy. Regulation BTR imposes a legal blackout on directors and executive officers during certain pension plan blackouts.