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Most Pennystocks increase value by a method called 'pump and dump'. Some smart ass guys buy a shell company listed on Pinksheets. They start publishing news every day about management changes, letters of intent from potential partners, patent applications. There are tons of Pennystock sites who multiply their news. As a result prices move up and then it makes 'BANG' and the trade is halted by the SEC. If you got in early and took profits after a couple of days you made a nice cut. If not - at that moment all your investment goes down to zero. 90% of Pennystocks end up this way.
Smart and fast traders make lots of money with them, but you should never risk more than lets say 1% of your investment account.
Be aware of some pitfalls:
- spreads: Pennystocks have bigger spreads between bid and ask ... so your stock will need to move higher 20% or 30% just to bridge the difference between your buy and sell price.
- fees: some brokers charge very high fees for penny stocks.
- margin: penny stocks are usually not marginable. They will draw down your daytrading buying power by the factor 4.
Good luck.
PS: why not buy options on C - Citibank. They are pretty cheap these days and upside potential for this 3.35 stock are possible.
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