The process of purchasing or selling over-the-counter (OTC) stocks can be different from trading stocks that are listed on the New York Stock Exchange (NYSE) or the Nasdaq. OTC stocks aren't listed on the exchange. Purchases of OTC securities are made through market makers who carry an inventory oꦫf stocks and bonds that they make available directly to🗹 buyers.

澳洲幸运5开奖号码历史查询:Some online brokers allow OTC trades. Full-service brokers offline also can place ord༺ers for a client.

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

Over-the-counter stocks don't trade on a regulated exchange such as the NYSE or the Nasdaq. They're trading OTC in most cases because they don't meet the stringent listing requirements of the major stock exchanges.

Tens of thousands of small and micro-capitalization companies are traded over the counter around the world. Many companies that trade over the counter are seen as having great potential because they're developing a new product or technology or conducting promising research and development.

Others trading OTC were listed on an exchange for some years only to be delisted. A stock can be automatically delisted if its price falls below $1 per share. Those shares need to trade somewhere if the company is still solvent.

How OTC Stocks Are Different

OTC stocks are known as 澳洲幸运5开奖号码历史查询:penny stocks because they generally trade for less than $5 per share. The companies that sell them usually have a market capitalization of $50 million or less.

Penny stocks have always had a loyal following among investors who like getting a large number of shares for a small amount of money. The investor ends up making a bundle if the company turns out to be successful. The loss is hopefully a small one if it doesn't.

Potential investors should be aware that these companies aren't required to provide a lot of information about their finances, their business operations, or their products as is required for companies that are listed on the regulated stock exchanges. It's important to take their statements with a grain of salt and do your research.

How to Trade OTC Stocks

The first step an investor must make before trading OTC securities is to open an account with a brokerage firm. Check first to make sure it allows OTC trades if you're going with an online discount bro❀ker. , , and are among those that do.

You can buy and sell OTC stocks if you go with a real-world, full-service brokerage. The broker will p𓃲lace the order with the market maker for the stock you want to buy or sell. The proce💃ss is the same as it is for investors with any stock transaction. They can place limit or stop orders to implement price limits.

Most common stocks with real potential are priced over $15 per share and are listed on the NYSE or Nasdaq. Stocks pricওed below $5 that trade over the counter may have murkier financial outlooksꦍ and are generally speculative and very risky.

Most successful stocks such as Microsoft (MSFT), Meta (META), formerly Facebook, and Tesla (TSLA), all first liste💯d their shares on the NYSE or Nasdaq ꦇwith prices above $10.

Can Investors Short Sell OTC Stocks?

Short selling is allowed on securities traded over-the-counter but it isn't without potential problems.

These stocks generally trade in low volumes and this makes them Illiquid. An investor trying to cover an unprofiᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚtable short p𓃲osition could get stuck.

OTC securities have also been the focus of pump-and-dump schemes. Con artists use social media and email to heavily promote a thinly-traded stock in which they have an interest. This can create a high spi💖ke in the price of the stock. The con artists grab their profits and e🔥veryone else loses money.

These schemes often use OTC stocks because they're relatively unknown and unmonitored compared to exchange-traded stocks.

The Bottom Line

Over-the-counter stocks aren’t listed on the New York Stock Exchange, the Nasdaq, or any other re𝓀gulated exchange. These companies are unregulated and are often smaller, newer, and provide unsubstantiated data. This comes with both pros and cons. They’re typically much less expensive to trade but they’re also riskier.

Be sure to do your h🦂omework before venturing into any new trading arena.

Disclosure: Investopedia does not provide investment advice; investors should consider their risk tolerance and investment objectives before making investment decisions.