Over the counter (OTC)
In general, the reason for which a stock is traded over-the-counter (OTC) is usually because the company is small, making it unable to meet exchange listing requirements. Also known as "unlisted stock", these securities are traded by broker-dealers who negotiate directly with one another over computer networks and by phone.
As such, OTC stocks are generally unlisted stocks which trade on the Over the Counter Bulletin Board (OTCBB) or on the pink sheets. Be very wary of some OTC stocks, however; the OTCBB stocks are either penny stocks or are offered by companies with bad credit records.
Source: http://www.investopedia.com/terms/o/otc.asp
My Opinions
Hmm..means even small businesses can be listed and raised funds in this markets. But its very high risk. Reason?
What i observed, from trading OTC, you wont be able to know the buying and selling price in queue for this market unlike equity markets such as NYSE or SGX, where brokeages offered services to see the queuing volumes and prices offered.
You may be queuing to buy at 0.05c for that counter, and the order may not be filled even if the platform shows that your price has been penetrated.
To know if the stock is a OTC counter, normally they have a stock symbol will end with a .PK or . OB, depending where it is traded, i guess...haha..will need to confirm this detail.
Risks of OTC
Although stocks quoted on the OTCBB must comply with SEC reporting requirements, other OTC stocks, such as those stocks categorized as Pink Sheets securities, have no reporting requirements, while those stocks categorized as OTCQX have met alternative disclosure guidelines through Pink OTC Markets.
The OTC market presents investment opportunities for informed investors, but also has a high degree of risk. Many OTC issuers are small companies with limited operating histories or are economically distressed
Source: http://en.wikipedia.org/wiki/Over-the-counter_(finance)
Readings on FAQ on OTC Mtk trading:
http://www.pinksheets.com/pink/faq.jsp#investor
Saturday, August 30, 2008
Wednesday, August 6, 2008
Stop orders
Recently learn this new order...haha..kinda sad that only few brokerage offer this option.
Stop order allow traders to key in a price which he want to buy or sell. Isnt that same as a limit price?
Hmm..kinda off...the difference is this
If you key in a stop buy order at 1.00 and a limit price order at 1.00. If the price is to hit 1.00, both orders will get penetrated. But in the case, if the price is to gap when the market opens, the price hit 1.2, the limit order at 1.00 will not be filled but the stop buy order will be filled as the price penetrated 1.00 and get filled at the market price of 1.2 at that point of time.
Disadvanatage of stop order is that, there will be circumstances that your order may be filled at a higher buying price or cut loss at a lower selling price as there is no limits once the price penetrated further than expected or anticipated.
Thus there is another type of order known as Stop limit order, where one can determine the stop limit at the entry and exit point. But think this type of order isnt free. Haha...one will have to subscribe. Perhaps there are brokeage which offer free stop limit orders usage in their system...just im unaware of it.
Do spend time researching on different orders types in the trading platform given by your brokeage. They will definitely better better explaination than mine version. :)
Will correct and update on this post once i familarise on this order type.
Stop order allow traders to key in a price which he want to buy or sell. Isnt that same as a limit price?
Hmm..kinda off...the difference is this
If you key in a stop buy order at 1.00 and a limit price order at 1.00. If the price is to hit 1.00, both orders will get penetrated. But in the case, if the price is to gap when the market opens, the price hit 1.2, the limit order at 1.00 will not be filled but the stop buy order will be filled as the price penetrated 1.00 and get filled at the market price of 1.2 at that point of time.
Disadvanatage of stop order is that, there will be circumstances that your order may be filled at a higher buying price or cut loss at a lower selling price as there is no limits once the price penetrated further than expected or anticipated.
Thus there is another type of order known as Stop limit order, where one can determine the stop limit at the entry and exit point. But think this type of order isnt free. Haha...one will have to subscribe. Perhaps there are brokeage which offer free stop limit orders usage in their system...just im unaware of it.
Do spend time researching on different orders types in the trading platform given by your brokeage. They will definitely better better explaination than mine version. :)
Will correct and update on this post once i familarise on this order type.
Tuesday, August 5, 2008
CFDs
Recently just started exploring CFDs, Contract for Differences, a derivative product where one can "short or long" the market without involving trading with the mother share but playing with the price flucuations.
If one participate in CFDs, one doesn't participate directly in the market by buying and selling the mother share itself. One is actually betting with the broker, the broker will earn the commission fees, while borrowing shares from its inventory to hedge its position.
One can long or short CFDs and the price is the same as the mother share.
Assuming if it's a bear market,if one have the patience and cash, you want to have a long position, you "feel" the price is cheap, you buy...but how long will the share appreciate or see day light, break resistance? 2nd thing is that your cash will be locked in the share. Are you planning to be a long term investor by choice or by circumstances?
One can short using CFDs, in this bear market, to earn a relatively safe returns as the stock is going down trend and of cos, there will be probability that it will go uptrend then you will have to learn to cut losses and cover your position.
When choosing brokeage to trade CFDs, do know that different brokages some offer a longer list of shortable shares, some counters lack liquidity, thus will need for a higher initial margin.
Remember, CFDs are leverage products and there will be margin calls if there are increase unexpectated volatility.
For now, i will continue to explore and share if i have future experiences.
If one participate in CFDs, one doesn't participate directly in the market by buying and selling the mother share itself. One is actually betting with the broker, the broker will earn the commission fees, while borrowing shares from its inventory to hedge its position.
One can long or short CFDs and the price is the same as the mother share.
Assuming if it's a bear market,if one have the patience and cash, you want to have a long position, you "feel" the price is cheap, you buy...but how long will the share appreciate or see day light, break resistance? 2nd thing is that your cash will be locked in the share. Are you planning to be a long term investor by choice or by circumstances?
One can short using CFDs, in this bear market, to earn a relatively safe returns as the stock is going down trend and of cos, there will be probability that it will go uptrend then you will have to learn to cut losses and cover your position.
When choosing brokeage to trade CFDs, do know that different brokages some offer a longer list of shortable shares, some counters lack liquidity, thus will need for a higher initial margin.
Remember, CFDs are leverage products and there will be margin calls if there are increase unexpectated volatility.
For now, i will continue to explore and share if i have future experiences.
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