OTC Stocks

OTC Stocks is a term used for stocks that trade outside of the Nasdaq, NYSE, and the Amex. OTC stocks cover penny stocks, micro cap stocks and small cap stocks, and are traded through the Over The Counter Bulletin Boards, or OTCBB, and the Pink Sheets. Both the OTCBB and the Pink Sheets are electronic quotation boards like the Nasdaq, except that the Nasdaq deals with mid to mega cap stocks.

Established in 1990 as a measure to protect OTC stocks investors and provide transparency over securities transactions, the SEC has mandated that companies desiring to trade on the OTC bulletin boards should report their financial information to the SEC, as well as banking and insurance regulators before they can start trading. They are also required to submit quarterly financial reports to the SEC. This provides OTC stocks investors with the added advantage of being able to review the reports and documents filed by the company they’re looking to invest in, before they place their money on that company’s stocks.

Unlike the major stocks exchanges where the stocks are listed on huge boards, OTC stocks are unlisted and must be bought from dealers/brokers who are known as market makers. These market makers usually have a variety of securities in their portfolio, and they will peg an ask price for each stock they have.  The ask price is the price they want to sell the stock for. You, on the other hand, have a bid price, which is the price at which you are willing to buy the stock.

In order to trade OTC stocks, you need to hire a broker/dealer, open a bank account that will be connected to your stocks investment, and then place your order. One of the most important things in OTC stocks trading is that you need to have a broker/dealer whom you can trust and feel comfortable with. There are two types of brokers – a full service broker and a discount broker. A full service broker will give you financial advice in addition to processing your transaction for you.

A discount broker just processes the transaction, and usually comes at a cheaper rate than a full service broker. If you’re a newbie to stocks trading and feel that you need expert advice in order to decide what to invest in, then a full service broker will serve your purposes. On the other hand, if you want to do the research and analysis yourself and feel that you’d like to make your own decisions and can get advice elsewhere, then what you need is a discount broker.

Sites about OTC stocks are plentiful on the internet. There are hundreds of web sites and message boards that will provide you with their stock picks, forecasts, and reviews. The key is finding the legitimate sources, as some of these may be vehicles for fraud schemes. In addition to information on stocks investment, you may want to update yourself on current events and trends, as these have a direct influence on stock market prices.

Whether it’s finding a good broker, finding a good OTC stock, or knowing what signs to look for in order to determine if it’s a good time to invest in or pull out of a certain company, our website and Newsletter will help you make sound decisions on your investment. Our stocks analysts study the major stock exchanges, the OTCBB, and the Pink Sheets everyday, analyze companies that are promising, and we report the information to you. Through our extensive information network and financial expertise, we’re able to see signs and trends that you may not, and by subscribing to our newsletter you’ll be able to get a foot inside the company door before the institutional investors do.

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