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Penny Stocks An Overview Of The Prices Changes
Penny stocks are low-priced common stocks of relatively small companies. These stocks trade at less than $5 per share and are usually highly volatile.
While penny stocks are commonly defined as stocks that are traded outside any of the major stock exchanges, i.e. NYSE, NASDAQ, or AMEX, the official definition from the SEC is a little broader. According to the SEC, penny stocks are common stocks of very small companies, regardless of whether it trades on a securitized stock exchange such as NYSE or NASDAQ or an OTC (over the counter) listing service such as OTCBB or Pink Sheets.
The OTCBB (Over The Counter Bulletin Board) is an electronic quotation system in the US that caters to many OTC equity securities that are not listed in the major stock exchanges. The otcbb provides real-time quotes, last-sale pricing, and volume information. Most companies that have been delisted from or who have not qualified in the major stock exchanges due to failure of meeting the minimum requirements usually end up being quoted in the OTCBB. Penny stocks are usually traded through this system.
Another system where penny stocks are usually traded is Pink Sheets. Pink Sheets is an electronic quotation system that also caters to OTC securities. This system is operated by Pink OTC Markets, and got its name from the pink colored paper it used in printing quotes before the creation of the electronic system. Small companies that wish to be quoted can easily do so in Pink Sheets since the system does not require the necessary requirements that the major stock exchange have. For example, they don't require companies to file financial statements with the SEC.
Usually, the prices of penny stocks are highly volatile meaning they can continue to rapidly rise in a short period of time and they can go crashing down in a short period as well. This makes these stocks quite risky to trade on. The advantage, however, is that if investors are able to invest while the stock price is low, ride with the rapid rise, then divest from it before it descends, he can easily reap huge returns from his investment. A usual minimum return of 5% to 6% in a span of two days is not far from possible.
Some penny stocks even experience very rapid growths, reaching double or triple of investments in just a few days. This is one reason why there are still a number of people who get interested with penny stocks.
When one is enticed to invest on penny stock, he must do some thorough investigation on the company, making sure that the claims of product innovations and financial health are well proven.
Financial, managerial and operational information for penny stocks are readily available in the SEC when listed in the octbb. The interested investor can start investigating there.
There are also sites such as MarketWatch.com, TheStreet.com, http://citronresearch.com and http://beaconequity.com that can provide valuable information regarding a company's operations, plans, working capital, subsidiaries and management.
About the Author Nir Dotan is a writer and promoter of Penny Stocks services, and Penny Stocks Preferred source for the latest news and information on the best and brightest Small Cap Stocks. |
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