A Guide to Grey market premium

Before the stocks of any company get listed in the stock market they get listed in the Grey market for a special amount. The IPO’s are traded outside the trade market and in the grey market with the help of grey market premium.

The GMP or Grey market Premium can tell you about the IPO on its listing day. In most cases, the forecast seems to be accurate and the IPO list at the calculated price only. People are ready to purchase IPO’s at an additional price which is due to the Grey market Premium amount added to the price of the IPO.

In a general case scenario let us take an example. A trader in the stock market is allocated 500 shares at a particular price for an upcoming IPO. Other buyers or investors deem the value of the share much higher than the issue price.

To make a profit, these investors pay a premium to the trader who was allocated the 500 shares and the trader agrees to sell the shares. This is how a GMP or Grey market premium works behind the scenes.

 IPO Grey Market Premium is a key indicator of the performance of an IPO. While selling the IPO in the Grey Market arena, you will have to sell them at a fixed price which is also known as the Kostak rates. The Grey market premium also records the trends of the investors on the particular IPO.

 How to locate Grey Market?

The Grey market can’t be contacted and is not a physical entity as trading is done based on word of mouth. You don’t get to exchange shares in the grey market arena. The GMP reflects how the IPO might perform on its listing day.

 Traders usually choose their buyers and sellers on a personal level. If people subscribe to an IPO that is less than that of shares then GMP will be lower and if there is a huge amount subscription then you can assume that the GMP will be higher.

 Top10StockBroker.com provides all details related to IPO GMP.

 How to trade in the Grey market?

As a trader, the profit you can make in the Grey market arena is by selling the shares at a profitable rate before the IPO shares are listed on the Share market or stock exchange. You can also sell your IPO application at a particular price and exit with a profit.

 In case if you miss the application deadline, you will still be able to buy the application at an increased price. Grey market is the counter market and as a result of which you cannot go to an official person who will help you out here.

 However, if you are interested to invest through Grey Market in IPO stocks then you will have to contact the local dealer who will find out sellers and buyers for you who also operates through Grey market. Grey market is operable in cities like Mumbai, Gujrat, Delhi, Jaipur, Kolkata, Bengaluru, and many more.

Conclusion

GMP or Grey market Premium helps to identify the interest level of the buyers and sellers for a particular IPO. No one can guarantee that the indication given by the GMP for a particular IPO will be 100% correct.

 However, people use this tool blindly before they subscribe to an IPO. In past, with Zomato IPO and Burger King IPO, GMP was predicted to be 50-70% and which was accurate on the listing day of these IPOs. With the right knowledge and experience, you can earn huge profits through Grey market premium