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.
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.
Intermediate Traders and Investors
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.
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