Penny Stocks traded over the counter – OTC

When you’re reading about penny stocks, you’ll probably come across the phrase OTC penny stocks. But what are they and how do they affect you if you are thinking of buying any of these stocks? The initials OTC stand for ‘over the counter’ and once you start digging into this area of ​​penny stocks it’s easy to understand what it means. As you will see, this type of stock is quite different from the more conventional type of stock.

Here is the difference. With a large company, penny stocks will likely trade on the New York Stock Exchange or a similar exchange. But for a company to trade its shares in this way, it must have enough shares to ensure that they are traded on a proper exchange.

If shares cannot be traded on a large exchange because there are not enough of them, they will be traded over the counter. So when you see OTC penny stocks, you’ll instantly know you’re dealing with a company that’s smaller and possibly also brings a little more risk with it.

Of course, you have to be very careful no matter what kind of penny stocks you invest in. They are generally considered risky investments, as the companies are smaller and have less value than larger companies with more expensive stocks. But there’s always the hope that you’ll find a company that ultimately does extremely well and rewards you with a good return on its stock.

However, over-the-counter penny stocks require you to be even more careful than you would be to invest in general penny stocks. Although there are many dealers to help you make these trades, you are more likely to run into companies that will not provide you with a good investment. Another term you will come across regarding this type of stock is ‘unlisted’. Basically, this means that it is not listed on a major exchange.

It is up to you whether you want to try investing in OTC penny stocks. Some people like this type of action, but for others it represents too much risk. Only you will know, after additional research, if OTC trading is right for your needs and risk appetite.