Posted on 06 February 2012.
The New Year is a great time to take advantage of penny stock options. If you have little experience with this type of investment, however, there are a few things you should know before you get started. First, it is important that you have a good understanding of how penny stocks work. Pretty much any stock that costs less than five dollars per share is considered a penny stock. Most are also considered to be over the counter (OTC) stock, which means that they are listed on the pink sheets instead of on the regular market. Pink sheet stocks are known for being risky investments. The pink sheets require very little information from the companies they list and penny stocks are not regulated by the SEC. Many investors have made fortunes with OTC stocks, however, due to their low cost and wide margin for appreciation. Penny stock options are particularly popular, as they have all the advantages of regular penny stocks, but with much less risk.
Penny stock options, like all types of options, offer investors additional security and versatility. An option is a type of futures contract that specifies an exact date and price at which the stock will be sold. As its name suggests, however, the terms specified in an options contract are not set in stone. When the date arrives, an investor can choose to hold onto the stock if they do not want to sell it. This offers security rarely seen in the pink sheets. Although it may be difficult to say for sure how a penny stock will perform, options give investors the ability to wait until a stock is ripe for selling before they make the sale. In short, penny stock options give investors a greater number of options, and this is always a good thing.
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