What are Penny Stocks?

What are Penny Stocks?

What are penny stocksPenny stocks are common shares of small public companies that trade at low prices per share. In the United States, the SEC defines a penny stock as a security that trades below $5 per share and is not listed on a national exchange. In the United Kingdom, stocks priced under £1 are called penny shares. These types of stocks are generally considered to be highly speculative and high risk because of their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. Trades are often done through the counter through the OTCBB and pink sheets. 

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How to trade in derivatives

How to trade in derivatives

Financial DerivativesBefore knowing how to trade in derivatives, it is important to know some common terms. The first term to be explained is a forward contract. In a forward contract, two parties agree to do a trade at some future date, at a stated price and quantity. No money changes hands at the time the deal is signed.Forward contracting is very valuable in hedging and speculation. The classic hedging application would be that of a wheat farmer forward -selling his harvest at a known price in order to eliminate price risk. Alternatively, a bread factory may want to buy bread in order to assist production planning without the risk of price fluctuations. If a speculator has information or analysis which forecasts change in prices, then they can go long on the forward market instead of the cash market. The speculator would go long on the forward, wait for the price to rise, and then take a reversing transaction making a profit.

The types of derivatives investment methods include:

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