Financial Terms / penny stock

Penny Stocks Explained

Penny stocks are equities that trade on an over-the-counter market and have low liquidity.

What are penny stocks?

Penny stocks are stocks that trade outside of the major market exchanges and typically have less liquidity and lack information available to investors.

What is the risk associated with investing in penny stocks?

Penny stocks are considered to be highly speculative investments due to their lack of liquidity, limited information, and potential for manipulation.

How can I calculate my potential return on penny stocks?

Your potential return on penny stocks can be calculated by using the following formula: Potential Return = (Current Price – Purchase Price) / Purchase Price.

Key Points

Penny Stocks are a Type of Stock
Penny stocks are a class of stock that are often traded at a very low price. They are not listed on the major exchanges such as the NYSE and NASDAQ, but instead trade on the OTC Bulletin Board.
Penny Stocks Trade on the OTC Bulletin Board
The OTC Bulletin Board is an electronic trading system that allows penny stocks to be traded. It is not regulated by the Securities and Exchange Commission, so investors should be aware of the potential risks associated with investing in penny stocks.

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