Gary, I do hold these IPOs overnight. I trade them intraday, obviously, but I use a "split" strategy.
I buy 2-4K shares - depending on availability (you just have to go ahead, and BUY, and not worry over a 5 point move either way).
I subsequently trade half the shares (1-2K) intraday for the moves. That locks in some profit for me, and lowers my cost of acquisition on the other half. Plus, it is not practical most of the time to buy/sell ALL 2-4K at once, because the price moves so fast.
The second half, I usually hold overnight (though it depends a bit on the specific IPO). Example: Friday, I got in on AKAM at a fairly high price of 124, 125, 126. I sold half my stake at 165 the same day (BTW, I'm not just saying that - I have been doing it in real time with a poster on SI - moniker of "infostream" - we exchanged PMs on exact entry/exit prices and I held until I sold half at 165).
The following day, I rebuy my second half. The philosophy here is as follows: I usually get in low enough, that even if there is a sell-off the following day, it never reaches the point where I first got in; further, I have locked in the profit on half already; if the stock gaps down - no harm; if the stock gaps up, I still have half of a stake.
I rebought my second half of AKAM, and traded it, following trading day (Monday), sold the half again. Today - repeated.
Next, I use the "3 times" rule. I will do that 3 times. The third trading day, I lighten up - I sell 3/4 of my stake - so, if I bought 4K the very first day, I end the 3rd trading session with 1K at the end of the day.
There are other factors. I look at price targets. F.ex. I don't like to hold too much once the stock breaks $200. At that point, I will lighten even further, and leave maybe 500 shares (of an original 4K, or less, depending on the proportion). The remaining 500 shares, I leave until I don't like the stock at all.
This way, I have traded many IPOs, and have left anywhere between 200-600 shares in several recent IPOs (f.ex JNPR, RHAT, SCMR etc.). These shares I leave to rot there until the stock or business looks bad... because these shares are 100% free, entirely purchased with profits from the stock, so even if they went to zero overnight, I'd be still way ahead.
I intend to do exactly the same thing with COBT this coming Friday.
You mention TSCM - well, there are IPOs and IPOs. Yes, there is a vast difference. The conceit with a JNPR or a SCMR is that it is the next CSCO - this conceit takes time to wear off... it will not plunge like TSCM. Pick your IPOs carefully. F.ex., the coming COBT, will be no less durable than RHAT - it is another linux shop, and the conceit (idiotic as that may be) is that this is the MSFT killer... again, durable. So, it is not as random as you may think, with these IPOs.
As for trading 2 points, or indeed, scalping 1/4 here and there, I only do that with stable stocks like NITE, ORCL, NOVL etc - never an IPO.
Good luck!
Morgan |
