Definition of Penny Stock

What is a penny stock? What is the definition of the term penny stock?

The definition of a penny stock is a bit more complicated than you might think.

The literal definition of the term would be - a stock that trades for less than $1. Meaning, the stock is trading for just pennies.

-- Penny Stock definition - financial term --For instance, a stock that is trading for 50 cents per share? That would be a penny stock.

Many times a stock that is trading for more than $1 is also called a "penny stock" - what gives?

The term "penny stock" can also apply to highly illiquid companies that trade on the pink sheets or through the OTCBB.

A $2 stock that trades on the pink sheets may be referred to as a "penny stock", even though it is trading for $2.

The term "penny stock", in a broader sense, can refer to any highly risky, highly speculative stock that doesn't trade on a major index such as the DJIA or NASDAQ.

A $5 stock could conceivably be thought of as a "penny stock" if it was illiquid, highly risky and traded on the pink sheets.

Again - the literal definition? A stock that is trading for less than $1.

The more commonly used definition? Any risky, illiquid stock that is trading on the pink sheets or the OTCBB.

-- Articles That Mention Penny Stock:

Algorithmic Traders Gone Wild: Auris Medical Surges After Similarly Named Company is Acquired

Trader Blows Out His Account, Begs For Money To Cover Losses

SEC Nabs Four For Manipulation of Medical Marijuana Stocks

General Motors Briefly Trades at $1

101 of All S&P 500 Stocks Now Trading for Less than $10 Per Share