Penny stocks and options are high volatility investments that attract both the trader and therefore the future investor due to the tiny amount of capital required to form substantial gains as compared with less volatile higher priced stocks. The future investor buys a stock believing that a company’s value will increase over time and therefore the stock price along side it. When he buys an option it’s usually to scale back the danger in owning the underlying stock. The short term trader looks at things a touch differently. Typically a trader looks for giant percentage price movement over a brief period of your time . Large percentage, short term price movements are often found both in options and certain penny stocks, learn it more on http://www.nas100brokers.com/volatility75index.html.
Penny Stocks are often defined as stocks priced below $5. it’s often implied, but not necessarily the case, that penny stocks also are micro caps with capitalizations of but about $250 million. Penny stocks are often found across the complete range of capitalizations from micro caps to corporation stocks. for instance , Sun Microsystems (NASDAQ: SUNW) met the definition of a over the counter stock for much of 2004, trading between $4 and $5. In late 2004, trading between $5 and $6 per share, its capitalization was over $18 billion. the worth of an outsized cap $18 billion stock would rarely be expected to maneuver by an outsized amount over a brief period of your time . the most important percentage daily price gainers, of say 50% or more are typically stocks that started from $5 or less. But they’re typically micro caps.
As a group, micro cap penny stocks are avoided by large funds because prices are too easily suffering from sizeable buy and sell orders and capitalizations are too small to affect an outsized fund’s bottom line. Buying quite 10% of a publicly held company carries with it certain insider responsibilities. Large funds must wait until stock prices rise typically above about $20 before they will become seriously involved without moving the worth and still have price movement impact their financial results. the tiny investor features a distinct advantage over large fund managers when he takes an early position during a good micro cap over the counter stock .