Booyah Breakdown: ABCs of IPOs

So let's presume upper management was all given IPO shares with a lockup period of six months. Let's also presume the stock started trading at $10 and by noon, the price jumped to $50. To prevent those big guys from immediately cashing in on that pop and flooding the market with their shares, the underwriters force those bigwigs to hold their shares for 60 days.

But for that reason, many traders track lockup expirations because they know that the stock prices may fall after the lockup as the insiders start to sell their shares.

Cramer often talks about taking advantage of these lockup periods. On Dec. 18, he referred to Omniture (OMTR), which went public on June 28. Its lockup expired Dec. 26, and Cramer advised people who wanted to buy to wait until the lockup ends in the belief that the price might go lower.

And, no surprise, the volume on the stock doubled on the day of the lockup expiration.

Cramer also listed InnerWorkings , one of his "hot new stocks." The company, an outsourcer of printing services, is up 87% from its IPO in August.

Its lockup expires on Feb. 11. And while that doesn't mean you shouldn't buy the stock now if you like it, Cramer recommends that if you do buy, you should consider swapping out of it before the lockup expires "so you don't get stampeded by sellers."

So start paying attention to IPOs and their lockup expirations. Try following a few first. For instance, Cowen's (COWN) lockup expires on Monday. Valero GP Holdings' lockup expires on Jan 16.

Then you'll be properly armed to take advantage of the IPO market.

Skeedaddy would be so proud.

Come see Tracy Byrnes and RealMoney.com contributors Cody Willard and Richard Suttmeier speak at the Society for the Investigation of Recurring Events' annual meeting on Jan. 16 to discuss 2007 investment strategies. The meeting will be held at New York City's Princeton Club, 15 W. 43rd St., at 6 p.m.

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