How to Buy a New Issue Stock (5 Steps)

Buy new stock issues if you are an aggressive trader. New issue stock refers to stock offered for the first time in the market. It is also referred to as an initial public offering. An existing public company offering of stock is called a secondary stock offering.
You may wish to alert your broker that you intend to buy new issue stock. Brokers have regular access to new issue deals, but the lead manager of the offering controls where most of the stock goes. Deals come very quickly, and hot or strong deals have many indications of interest. You may be asked to increase your order knowing your order will be cut back sharply.
New issue stock for strong deals is usually allocated to the best clients of the firm. Some firms demand a lockup period of several days or weeks before you can sell the stock. If this is the case, it not wise to deal in new issues with this broker.
The managers of the deal will give a range of price for the stock offerings. The earlier you commit to a stock, the greater chance you have of getting it. If the deal is not strong, the broker should talk to his underwriters and advise you. Deals are usually very volatile and subject to heavy volume and churning by day traders.
Purchase stocks for $10 per share or more. Stocks below this price are usually intended for penny stock traders and uninitiated investors. Stay away from these stocks. Successful new issues demand institutional support. In addition, if the stock is moving up in price with strong volume and then retrenching in light volume do not sell the stock. This pattern is indicative of a healthy stock with continuing good technical strength.