OTC-Stock.com

Becoming a successful OTC stock investor is hard enough. But for a beginner to the field of OTC stock investing, the most difficult thing may be getting used to the terminology.

Our readers often ask for help with the terminology, so here’s a short list of a few common OTC stock investing words and phrases (in non-alphabetical order) that you may come across.

Over-the-Counter (OTC) Stocks:

These are stocks that are not listed on the NASDAQ stock exchange, AMEX, or New York Stock Exchange. In short, these are stocks that are not listed on any national securities exchange.

OTCBB:

OTCBB, which stands for Over-the-Counter Bulletin Board, is the electronic stock quotation system that displays real-time quotes for over-the-counter (OTC) stocks.  Broker-dealers, which include most of the major stock brokerage firms, subscribe to the OTCBB in order to check OTC stock prices and place trades for these stocks on behalf of their clients. To stay listed on the OTCBB, companies must ensure they make all SEC filings in full and on time.

Pink Sheets:

Like the OTCBB, the Pink Sheets is an electronic stock quotation system for OTC stocks. However, companies in the Pink Sheets have fewer listing and filing requirements than on the OTCBB. Hence they are arguably the riskiest investments for the novice investor. Companies which fail to meet the requirements of the OTCBB usually end up in the Pink Sheets which has less strict requirements regarding SEC filings.

Penny stocks:

Penny stocks are generally agreed to be stocks selling for less than $5. But some experts argue that they are stocks selling for less than $1. Either way, the one thing agreed upon is that penny stocks are generally small cap stocks of relatively young companies.

Thinly Traded OTC Stocks:

Each day stocks change hands as people buy and sell them. Stocks of popular companies that are in the news normally get higher volumes of shares traded. Hence they are heavily traded. OTC stocks are usually companies that attract less media attention so the volume traded is comparatively less than the big Microsofts or IBMs of the world. Hence this smaller volume is called thinly traded.

SEC:

SEC stands for the Securities and Exchange Commission. It is the official government watchdog for all stock investing activity in the United States. It is the commission created by Congress to regulate the securities markets and protect investors.

Market Capitalization:

The market cap of a company is its current stock price per share multiplied by its total number of outstanding shares.

Microcap stocks:

Microcap is often used interchangeably with small cap. Microcap refers to stocks in small companies with market capitalizations of $250 million or less. However small cap generally means companies with market caps of $1 billion or less. Most OTC stocks fit in this category.

Large cap stocks:

These are stocks of big companies with market capitalizations of $10 billion to $200 billion. Companies like Microsoft and Oracle qualify as large caps. Wall Street firms focus most of their attention on these stocks.

Mid cap stocks:

These are stocks of companies with market capitalizations of $2 billion to $10 billion.

As we receive more queries and suggestions from readers regarding OTC stocks, we’ll add to this page.