*Note: Primary market IPO trading is not available with us
If a company’s IPO has a lot of public interest, we may offer a ‘grey market’2 before the IPO takes place. This’ll let you predict on the company’s estimated market cap at the end of its first day of trading.
The price that we quote for a grey market offering will be based on our prediction of the company’s market cap at the end of its first trading day.
- You’ll ‘buy’ (go long) if you think the company’s market cap will be higher than the price we quote
- You’ll ‘sell’ (go short) if you think the company’s market cap will be lower than the price we quote
Secondary market: trading shares after the IPO
Once the company has listed, the secondary market will open. This is when you can trade on a share’s price movements with derivatives.
To trade on the secondary market, you’ll use CFDs. With these leveraged products, you won’t own the shares when you trade, but you’ll be able to predict on the share price whether it goes up or down. Note that trading on leverage increases your risk of losing more than your deposit.
With us, you can take a position on the secondary market for United Kingdom (UK) IPOs as soon as it opens – which is usually at 8am (UK time) on the day of the IPO. United States (US) IPOs might take a few hours to be available to traders, which is the case for all brokers.
Make sure you always have an effective risk management strategy in place when trading an IPO, as the share price could experience increased volatility right after the listing.
Learn how IPOs work
The IPO process starts long before the shares list on an exchange. First, a company has to make the decision to go public. This is followed by a financial audit of the business and a registration process. The news of an upcoming IPO will usually be released a few months before the planned listing – which gives you time to study a company’s fundamentals and decide whether you want to take a position on its shares.
Choose an IPO to take a position on
There are hundreds of UK, US and international IPOs every year. Find out more about upcoming IPOs or sign up to our exclusive mailing list to find new IPO stocks. By subscribing, you'll receive updates on any changes to expected IPOs, as well as the latest news on upcoming listings.
Get the latest IPO news
Decide how to take a position on an IPO
With us, you can trade on a company’s market cap pre-IPO with our exclusive grey markets, or take a positon on the company’s share price on the secondary market with derivatives like CFDs.
You can create a leveraged trading account to predict on a share’s price movements with derivatives like CFDs. Before the IPO, you can use these derivatives to trade our grey market, and after the IPO you can use them to predict on a stock’s price rising (by going long) and falling (by going short).
You might choose derivatives because they enable you to open a position with leverage, which requires a small deposit (margin) rather than committing the full value of the shares upfront. This can magnify profits and losses, as both will be calculated from the full exposure of the trade, not just the margin you put up a deposit. Derivatives also offer various tax benefits in some territories.3
Build your IPO trading plan and strategy
A good trading plan and risk management strategy will provide guidance on how to find opportunities, and when to take profits and cut losses. There are several ways you can minimise your risk, which include attaching stops to your positions. Stops will close your trade at a certain level if the market moves against you, minimising your losses.
To learn more about trade planning and risk management, join IG Academy. It’s a great tool for developing your knowledge on all things trading, with free online courses, webinars and seminars.
1. Let the stock establish some price discovery
Taking a position on an IPO on its opening day can be very different compared to other market opportunities. Support and resistance levels haven’t been established yet and people are often excited with certain expectations. One of the best ways to handle hot IPOs is to wait for the morning volatility to cool off and allow the stock to establish some ‘price discovery‘.
This will give you levels to trade off and price action will likely be less erratic and volatile. Having levels to trade off helps you manage risk, which is your number one goal when trading an IPO. Placing hard stops and managing trade size is a must.
2. Wait for the lock-up period to end
IPO shares are often subject to a ‘lock-up’ period. These can last up to six months and mean that existing shareholders cannot sell their shares immediately after a listing. If you notice that they are holding on to shares after this period, it could mean that shareholders think there is potential for growth and it’s time to buy because the share price could remain stable or increase.
But, if the share price falls after the lock-up period, it could indicate that confidence in the company is low. This could be an opportunity to go short with derivatives like CFDs.
Following this strategy means that you’ll miss out on the initial market volatility that IPOs often cause – which could be a good or a bad thing, depending on your individual appetite for risk. There’s no saying that you can’t combine these strategies. You could also trade the secondary market volatility with derivatives like CFDs on the day of the IPO.
3. Take a position on IPO stocks with derivatives
If you want to capitalise on upward and downward movements in a company’s share price on the day of its IPO, you could take a position with derivatives like CFDs. You can use these products to ‘buy’ (go long) if you think the company’s share price will rise, or ‘sell’ (go short) if you think it’ll fall.
But, bear in mind that CFDs are leveraged products, and leverage can increase both your profits and your losses.
Open your first IPO position
Once you’re ready to start trading shares, you can open your first IPO position. Remember that with us you can take a position on IPO shares via CFDs on our grey market offering1 or on the secondary market.
Before you open your IPO position, make sure you take steps to manage your risk like adding stops and limits to your open positions, and by monitoring your positions closely.
Can I make money trading initial public offerings (IPOs)?
Yes, you can make money on IPOs if you correctly predict share price movements. With us, you can take a position before the IPO through a grey market, during the IPO on the primary market, or after the IPO on the secondary market.
What are the ways you can trade an IPO?
Trading an IPO means that you’ll be taking a position with derivatives like CFDs. You can use these to trade our grey market offering, as well as to take a position on the secondary market on the day of the IPO.
How long before you can sell IPO shares?
IPO shares – the shares acquired by investors before the listing – are often subject to a ‘lock-up’ period. These can last up to six months and mean that private investors who held shares prior to the IPO cannot sell their shares immediately after a listing. However, the general public won’t be affected by lock-up periods, as they exist mainly to prevent those who acquired shares before an IPO from immediately selling the stock.
Develop your knowledge of financial markets
Find out more about a range of markets and test yourself with IG Academy’s online courses.
1 Based on our IPO offering that includes pre-IPO grey markets, primary market access, and trading on the secondary market.
2 We do not offer grey markets on all IPOs.
3 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in different jurisdictions.