a penny stock is defined by the sec as any stock that trades below $5. however, definitions vary as there are many large companies that trades under $5 per share. some investors consider penny stocks to be any stock below $3 that trades outside of the major market exchanges. a penny stock often refers to a stock that trades on the ? or over the counter. they are considered to be highly speculative and much riskier than seen in equity stocks because of their lack of liquidity and regulatory standards, large bid ask spreads, small capitalization and price volatility. for example, mike wants to purchase 5,000 shares of a highly speculative gold exploration company that offers stocks ? $1 a share. if the stock rises ¢25, his investment goes from $5,000 to $6,250, a profit of $1,250. however, if his initial investment fell by ¢10, he will lose $500, a loss of 10%. any stocks are not ?. although the prospect of massive gains from the small purchase of stock is attractive to beginner investors, the lack of standards and public disclosures in this market make penny stocks more of a gamble than a legitimate investment.
- penny stock・・・ペニー株