How Do I Buy an Over-the-Counter Stock?

The summons of purchasing or selling over-the-counter ( OTC ) stocks can be different from trading stocks listed on the New York Stock Exchange ( NYSE ) or the Nasdaq. This is because OTC stocks are, by definition, not listed on the exchange. Purchases of OTC securities are made through marketplace makers who carry an armory of stocks and bonds that they make available directly to buyers. Some on-line brokers allow OTC trades. Full-service brokers offline besides can place orders for a client .

Key Takeaways

  • Over-the-counter stocks are known as penny stocks because most trade for under $1 per share.
  • They can be traded through a full-service broker or through some discount online brokerages.
  • Prices can be tracked through the Over-the-Counter (OTC) Bulletin Board.

What Are Over-the-Counter ( OTC ) Stocks ?

Tens of thousands of small and micro-capitalization companies are traded over-the-counter around the world.

over-the-counter stocks do n’t trade on a regulate exchange such as the NYSE or the NASDAQ. In most cases, they ‘re trading OTC because they do n’t meet the rigorous list requirements of the major stock exchanges .

many companies that trade over the counter are seen as having big potential because they are developing a new product or engineering, or conducting bright research and development .

Others trading OTC were listed on an substitution for some years, only to be by and by delisted. A sprout may be automatically delisted if its price falls below $ 1 per share. If the company is inactive solvent, those shares need to trade somewhere .

How OTC Stocks Are Different

OTC stocks are known as penny stocks because they broadly trade for less than $ 1 per plowshare. The companies that sell them normally have a market capitalization of $ 50 million or less .

penny stocks have always had a firm follow among investors who like getting a big act of shares for a small amount of money. If the company turns out to be successful, the investor ends up making a bundle. If it does n’t, the personnel casualty is, hopefully, a small one .

potential investors should be mindful that these companies are not required to provide a lot of information about their finances, their clientele operations, or their products, as is required for companies listed on the regulate stock exchanges. It ‘s crucial to take their statements with a texture of salt and do your own research .

How to Trade OTC Stocks

The beginning measure an investor must make before trade OTC securities is to open an account with a brokerage tauten .

If you ‘re going with an on-line discount rate agent, check first gear to make certain it allows OTC trades. interactional Brokers, TradeStation, and Zacks Trade are among those that do .


The count of stocks trading on the nonprescription commercialize. If you go with a real-world full-service brokerage, you can buy and sell OTC stocks. The broker will place the regulate with the market manufacturer for the broth you want to buy or sell .

Bid and ask quotes can be monitored constantly through the Over-the-Counter Bulletin Board ( OTCBB ) .

From the investors ‘ vantage point, the process is the lapp as with any stock transaction. As usual, they can place terminus ad quem or stop consonant orders in order to implement price limits .

Both stocks and bonds can be traded over the counterpunch.

How OTC Stocks Are Different From early Stocks

Most common stocks with real potential are priced over $ 15 per share and are listed on the NYSE or Nasdaq. Stocks priced below $ 1, which trade over-the-counter, may have murkier fiscal outlooks and are by and large bad and very bad .

Most successful stocks, such as Microsoft ( MSFT ), Meta ( FB ), once Facebook, and Tesla ( TSLA ), all first gear listed their shares on the NYSE or Nasdaq with prices above $ 10 .

Can Investors Short Sell OTC Stocks ?

Although short deal is allowed on securities traded over-the-counter, it is not without potential problems .

These stocks broadly trade in low volumes. That makes them Illiquid. An investor trying to cover an unprofitable short-change put could get stuck .

OTC securities besides have been the focus of pump and dump schemes. Con artists use social media and e-mail to heavily promote a thinly-traded stock in which they have an interest. This can create a high spike in the price of the stock. The memorize artists grab their profits and everyone else loses money .

These schemes frequently use OTC stocks because they are relatively obscure and unmonitored compared to exchange-traded stocks .

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