Active Penny Stocks

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A hypothetical situation with penny stock, would it work?

Lets say I’ve been watching a stock go from 0.0001 to 0.0002 and back to 0.0001 multiple times a day, every day for a week. So this is a very active penny stock. If I put in an order for $5,000 worth at noon @ 0.0001 and at 6:00PM it went to 0.0002 (which would be my sell order), would my account have $10,000 in it? (over and over again for every time I do it?) Is this possible, yes or no and please explain your answer. Thanks!!!

very, very unlikely

you need to check the bid/ask spread and volumes to figure out if this is remotely possible.

likely what is happening is the market maker is buying shares at .o1 and selling them at .o2 .. the bid ask spread will be the .o1 difference and the volumes will probably be limited [he's no fool ... a few hundred shares offered is all he needs to have out there at any one time].

so when you try to buy 500,000 shares at .o1 … the limit order just won’t fill as there aren’t that many being offered at ..o1 … even if you somehow did amass that many shares, the sell order is limited as well and your sell at .o2 won’t be filled. there are only N hundred on order at that price.

of course, the market maker has plenty more … and he’ll happily sell them to you … a few hundred at .o1, another few hundred at .o125, another few hundred at .o150 … etc.

then he’ll buy them back from you … a few hundred at .o2, another few hundred at .o175 … another few hundred at .o150 …

what you’d find out is that to move 500,000 shares, your average buy price would be more like .o5 or even .o7 and your average sell price would be about .oo5 … so you’d lose most of your money.

not to mention that you’ll have to pay brokerage costs both in and out.

Active Penny Stocks

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