This year we have had a resurgence of IPOs (Initial public offerings), with several high profile companies going public this year. The questions about IPO stocks have been overwhelming in the past few weeks. One of the most common questions we’ve gotten: Should I trade IPO stocks on day 1? There are more IPOs coming this year, so it pays to study now and figure out if this is a context you can capitalize on or not.
Characteristics of Day 1 IPO StocksBefore even considering trading an IPO on Day 1, you need to understand how an IPO stock typically behaves right after it starts trading on the open market. They are defined by 3 main characteristics:
- Extreme volatility
- High volume