How To Buy OTC Stocks Where To Buy Over-the-Counter Penny Stocks

Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and invest in stocks over the counter past performance is not a guarantee of future performance. The OTC market allows many types of securities to trade that might not usually have enough volume to list on an exchange.

How OTC Markets Differ From Major Exchanges

The OTC market is an electronic network of buying and selling activity made of securities that are not listed on a major exchange such as the NASDAQ or NYSE. This article https://www.xcritical.com/ does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. There are no secret OTC investment strategies to guarantee a big win, and investors might wish to stick with strategies that serve them well on major exchanges. OTC stocks are securities that don’t trade on a centralized exchange.

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Meta trades for 24 times 2025 earnings, which isn’t cheap, but it isn’t a bad price to pay for one of the world’s most dominant tech companies. But one indicator suggests the recent trend of the biggest companies getting bigger at a pace that far exceeds the rest of the market could be coming to an end soon. And there’s a great way you can invest to take advantage of the next leg up in the stock market.

• A broker-dealer network is a system or organization that connects various brokerage firms and dealers within the financial industry.
• Interactive Brokers, TradeStation, and Zacks Trade are among those that do.
• The OTC marketplace is an alternative for small companies or those who do not want to list or cannot list on the standard exchanges.
• In this article, we’ll delve into the world of OTC stocks investing.
• With less transparency and oversight, OTC companies require extensive research.
• Finally, because of the highly speculative and higher risk backdrop of investing in OTC securities, it’s important to invest only an amount of money that you are comfortable losing.

Trading on the Over-the-Counter (OTC) Market

If you’re intrigued by the prospect of investing in OTC stocks, it’s wise to consult with a financial advisor or conduct extensive due diligence before taking the plunge into this distinctive investment landscape. OTC stocks are often more volatile and susceptible to market manipulation. Due diligence is crucial, as the lack of regulation can make it easier for fraudulent companies to operate in OTC markets. Additionally, the lower liquidity of OTC stocks can make it challenging to buy or sell shares at desired prices. One of the big risks, though, is that OTC securities tend to be thinly traded. As a result, they often lack liquidity, which means you may not be able to find a willing buyer if you want to sell your shares.

2025 is starting to get closer, and investors need to position their portfolios accordingly. While DraftKings has been focused on capturing market share, profitability has taken a back seat. However, recent trends indicate DraftKings should be profitable by generally accepted accounting principles (GAAP) standards for the full year in 2025. As the sports betting industry explodes, DraftKings has established itself as one of the premier platforms.

At big tech companies have outperformed, the market has become increasingly concentrated in just a few big winners. For example, the three biggest companies in the world, Apple, Nvidia, and Microsoft, have come to account for over 20% of the entire S&P 500. DraftKings is well positioned for both opportunities, and it remains a top platform and stock in this space. DraftKings also acquired the digital lottery platform Jackpocket this year to tap into the growing lottery industry. The company says it expects Jackpocket’s integration to contribute positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2025.

Depending on the OTC market on which an OTC stock trades, more or less reporting may be required. It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here). The middle tier is designed for companies that are still in the early to middle stages of growth and development. These companies must have audited financials and meet a minimum bid price of $0.01.

Some companies may want to avoid the expense of listing through the NYSE or Nasdaq. OTC markets offer access to emerging companies that may not meet the listing requirements of major exchanges. These smaller, growing companies can sometimes provide investors with the potential for higher returns, although this comes with higher risk. OTC markets provide access to securities not listed on major exchanges, including shares of foreign companies.

When companies do not meet the requirements to list on a standard market exchange such as the NYSE, their securities can be traded OTC, but subject to some regulation by the Securities and Exchange Commission. The SEC sets the overarching regulatory framework, while FINRA oversees the day-to-day operations and compliance of broker-dealers participating in the OTC markets. SEC regulations include disclosure requirements and other regulations that issuers and broker-dealers must follow.

Another market maker, Global Trading Solutions, offers to sell a smaller block of 10,000 shares at $0.90 per share. On the positive side, these stocks can offer the potential for significant gains. Many well-known companies, including Apple and Microsoft, started as OTC stocks before being listed on major exchanges.

The OTCQB and OTCQX markets have less stringent listing requirements than major exchanges, so companies at an earlier point of growth can list their shares. For investors, this means getting in on the ground floor of potential high-growth stocks. OTC markets provide opportunities for emerging companies and microcap stocks that do not yet meet the listing requirements of major exchanges.

The OTC Pink tier has no financial standards or reporting requirements. Investors should exercise caution when considering these very speculative securities. As with any investment decision, it’s important to fully consider the pros and cons of investing in unlisted securities. That’s why it’s still important to research the stocks and companies as much as possible, thoroughly vetting the available information. The over-the-counter market—commonly known as the OTC market—is where securities that aren’t listed on the major exchanges are traded.

Deposits into this account are used to purchase 10 investment-grade and high-yield bonds. The Bond Account’s yield is the average, annualized yield to worst (YTW) across all ten bonds in the Bond Account, before fees. The “locked in” YTW is not guaranteed; you may receive less than the YTW of the bonds in the Bond Account if you sell any of the bonds before maturity or if the issuer defaults on the bond. The process for OTC trading looks similar to that for other stocks, and you can buy and sell OTC through many online brokers, including Public. You’ll need sufficient funds in your brokerage account to complete the purchase, and will need to know the given company’s ticker symbol.

OTC stands for “over-the-counter.” OTC markets facilitate trading of securities outside of formal exchanges like the New York Stock Exchange. Within each tier, companies may be designated with additional tags to indicate their industry, location, or other attributes. For example, the OTCQB and OTCQX offer designations for fully reporting cannabis companies and SEC regulated banks, respectively. OTC stocks typically have lower liquidity, meaning it may take longer to fill your orders or you may receive a higher spread between the bid and ask price. Finally, because of the highly speculative and higher risk backdrop of investing in OTC securities, it’s important to invest only an amount of money that you are comfortable losing. You’ll also find stocks on the OTC markets that cannot list on the NYSE or the Nasdaq for legal or regulatory reasons.