The edge in trading IPOs: 18% annual return
"An IPO is like a negotiated transaction - the seller chooses when to come public - and it's unlikely to be a time that's favorable to you." Warren Buffett
Marsten Parker is a self-taught programmer and systematic trader with over 20 years of experience in the trading world. He is best known for being featured in Jack Schwager's book, "Unknown Market Wizards," where he is highlighted as the only purely systematic trader in the series.
"It's so simple that it's stupid." With this sentence, he introduced his IPO strategy in a podcast interview. Different than what motivated Buffett to say his famous quote about IPOs (Buffet usually buys and holds), Marsten's strategy consists of frequently buying and selling IPOs, holding the positions for just a few days. The rules, as he explained:
Since 2000, there have been a bit over half a million events of this nature in the dataset (I use the Nasdaq Sharadar Core US Equities Bundle dataset). From them:
