The corona pandemic might have rocked the global economy, especially the oil industry, but penny stocks survived. Penny stocks offer high risk and high rewards at the same time, including oil penny stocks.
A barrel of oil experienced a negative price range for the first time in April 2020. Many companies in the oil industry reported substantial losses. The oil price dropped so low in April 2020 that some companies were willing to pay people to take barrels of crude oil from them. Just a month later, there seems to be hope for oil companies.
The year 2020 experienced plenty of global market volatility. Oil penny stocks seem to be moving higher in the market, but not all penny stocks are. This reaction is attributed to the opening of most economies in the world within a few weeks. The opening of global economies affects oil penny stocks. Most penny stocks act independently — broader markets might decline but penny stocks will still fly high.
Oil penny stocks are penny stocks of small companies, which deal in the oil and gas industry. These stocks offer short-, medium- and long-term investment opportunities. As a trader, you can enjoy the flexibility and make money from penny stocks. You can maximize your premiums by trading in stocks, which have low share prices and high upside potential.
If you’re looking for penny stocks to buy, we at Benzinga have compiled the best oil penny stocks for you to consider.
Contents
Overview: Oil Penny Stocks
Penny stocks trade outside the top market exchanges. A lot of speculation and high risk is associated with these small-cap stocks. The specific definition of penny stocks varies among different countries. In the western market, penny stocks are stocks that trade below $5.
They are classified as micro-cap stocks because their market capitalization is less than $300 million. Just like other stocks, penny stocks offer an opportunity for potential investment.
Penny stocks have the following traits:
- They lack liquidity.
- Information related to penny stocks is never readily available to the public.
- Most penny stocks lack history regarding assets, revenues, operations, and products.
- They do not have minimum standards.
The oil and gas industry is experiencing 2 global disasters: the COVID-19 pandemic and the oil price wars. This caused oil and gas stock prices to drop. With many people implementing social distancing, motor vehicles were not in use. Despite the panic of the oil industry, it’s evident that oil stocks are bouncing back.
With oil stocks on the upswing, the stock market has a lot of opportunities for investors. There have been global output cuts of crude oil due to the low demand for oil in many countries. Also, the strained relationship between the U.S. and China is closely being monitored by investors. If the friction leads to the erosion of the Phase 1 trade agreement, this will affect the oil prices negatively. More uncertainty in the U.S. financial markets has been fueled by the recent violent unrest in major U.S. cities.
Despite having high risks, oil penny stocks have a possibility of yielding very high returns from low investment. Oil penny stocks are regulated at a national level by a stock exchange. The U.S. Securities and Exchange Commission (SEC) has its own definition of penny stocks. These stocks have the following features:
- Shares of a small company trade below $5; shares of private companies lack an active trading market.
- Trading shares are done over the counter but they can be listed on both local and foreign securities exchanges.
- Shares are very illiquid.
- Pricing of shares is difficult due to a lack of price quotations.
Penny stocks are placed in their independent category known as a trade-to-trade basket. This is because of the high risk associated with them. Penny stocks can be traded both in and outside the stock exchange. Transactions are done on a gross basis.
It’s important to understand all the risks associated with oil penny stocks. Although these small caps offer a wonderful investing opportunity with plenty in the market, you need to know which ones to avoid and which ones to trade. You can use a stock screener, which is a smart trading program. A stock screener helps you identify exciting oil penny stocks.
To be a pro at trading penny stocks, you need to come up with trading strategies. Following these trading strategies could help you make money in the short, medium and long term.
Best Online Brokers for Oil Penny Stock
Below is our list of best online brokers to use when you want to trade in these stocks.
Best For
Intermediate Traders and Investors
N/A
1 Minute Review
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
Best For
- Active traders
- Intermediate traders
- Advanced traders
Pros
- Commission-free trading in over 5,000 different stocks and ETFs
- No account maintenance fees or software platform fees
- No charges to open and maintain an account
- Leverage of 4:1 on margin trades made the same day and leverage of 2:1 on trades held overnight
- Intuitive trading platform with technical and fundamental analysis tools
Cons
- Does not support trading in mutual funds, bonds or OTC stocks
Best For
Futures Trading
N/A
1 Minute Review
TradeStation is for advanced traders who need a comprehensive platform. The brokerage offers an impressive range of investable assets as frequent and professional traders appreciate its wide range of analysis tools. TradeStation’s app is also equally effective, offering full platform capabilities.
Best For
- Advanced traders
- Options and futures traders
- Active stock traders
Pros
- Comprehensive trading platform and professional-grade tools
- Wide range of tradable securities
- Fully-operational mobile app
Cons
- Confusing pricing structure to leave new traders with a weak understanding of what they pay
- Cluttered layout to make navigating TradeStation’s platform more difficult than it should be
Best For
Options Trading
N/A
1 Minute Review
This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.
Best For
- Novice investors
- Retirement savers
- Day traders
Pros
- World-class trading platforms
- Detailed research reports and Education Center
- Assets ranging from stocks and ETFs to derivatives like futures and options
Cons
- Thinkorswim can be overwhelming to inexperienced traders
- Derivatives trading more costly than some competitors
- Expensive margin rates
Best For
Advanced traders
N/A
1 Minute Review
Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU). Securities offered by Futu Inc., regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.
Get started right away by downloading Moomoo to your phone, tablet or another mobile device.
Best For
- Cost-conscious traders
- Novice traders
- Active/Advanced traders
Pros
- Free Level 2 market data for all users who open an account
- Commission-free trading in over 5,000 different stocks and ETFs
- Over 8,000 different stocks that can be sold short
- $0 contract fee for trading options, no commission either
- Strong market data and analysis tools with over 50 technical indicators
- Access trading and quotes in pre-market (4 a.m. to 9:30 a.m. ET) and post-market hours (4 p.m. to 8 p.m. ET)
- No minimum deposit to open an account.
- Active trading community with more than 100,000 app users
Cons
- No phone or chat support
Are Oil Penny Stocks Attractive?
When it comes to oil penny stocks, you need all the intel you can gather. Information from analysts should be part of your trading strategy. Due to their volatility, it’s always important to be updated on the latest oil penny stock news. Your penny stocks trading strategy could benefit you in a high-risk trading environment. Consistent research will help you make a more informed decision in trading.
