penny stock fortunes

Penny Stock Brokers

Penny Stock Brokers
How do I find an OTC that will help me buy a penny stock?

Okay, I know everyone hates Penny Stocks, but call me Miss Longshot cause AZD-t just went up 5 percent yesterday, after their excellent presentation on BNN about their first ever pure electric fleet vehicles and the contract they just got with Canada Post. I use a discount broker for my trades so any recommendations on a broker with low fees that will let me buy stocks OTC would be appreciated. Thank you.

An OTC transaction requires the middle man to partake in the risk of the stocks that he sells in that he must have an inventory. You won’t find anyone who does this with penny stocks and manages to remain in business for long. 5% is just a blip, probably the difference between a buyer meeting an ask price and a seller settling for a bid price, indeed if you look at their stock chart, the price moves tend to be in 5 cent increments so the penny spread in the bid and ask isn’t backed by a lot of market depth. People are probably putting out teaser asks to mask their real asks a good nickel above.

There are much better options that penny stocks literally. Even options without risk.

For example because people are bearish about retail. You can extract that sentiment from Walmart’s stock by doing the following:

Short Dec. 17, 2010 put options with a strike of $55 at $2.02 (current bid price)
Short WMT stock at $53.83 (current bid price)
Buy Dev. 17, 2010 call option with a strike of $55 at $0.64 (current ask price)

Put proceeds of the two short sales aside as you’ll need most of it to cover.

On Dec. 17 if Walmart has dropped in price, the people who bought the puts from you will exercise them forcing you to buy their shares of Walmart for $55 which you use to cover your short position in Walmart stock, the call option would be out of the money and expire worthless. This means you make $2.02-$0.64-($55-$53.83) or $0.21 on every $0.64 you spent on this play (ignoring commissions, taxes and interest paid on borrowing the securities for the short). If the Walmart stock price went up above $55 then you would use your call option to buy stocks to cover your short position, no one in their right mind would exercise a put to sell at lower than market value (i.e.: the puts are expiring out of the money and worthless) but should someone happen to do so, just buy their stock and sell it at the higher market price, this means you make $2.02-$0.64-($55-$53.83) or $0.21 on every $0.64 invested in 34 trading days regardless of what the Walmart stock price does, that’s a 32.8% yield in just 34 days which given that there are about 250 trading days in a year, that would extrapolate out as 705.69% per annum compounded. Of course, a lot of that will go to commissions and taxes unless you had a lot of money to leverage this play with and as most of it is shorts, you would need a lot of margin hence credit to do it and finding such opportunities isn’t always possible; but the return is whether the price goes up, down or stays the same. That’s a hell of a lot better than hoping for a 5% uptick on some arbitrary commentary.

These opportunities happen with hot popular stocks that are in no danger of disappearing so why would you chase a phantom 5% on a penny stock. The hedge companies don’t suck up all of these opportunities cause many of them don’t have enough market depth in the options market to make it worth their while. As it is, you have to watch the numbers carefully to make certain you amortize the commission costs as you’re living in that very small spot between not profitable and profitable enough for the big boys. Although the yields look astounding, you’re really just scrapping pennies together but these are being scraped off quality stocks not long shots.

Unless they have some kind of patent, a small EV manufacturer has no protection against the big auto manufacturers that have all said they would be entering the market. The barriers of entry are against the small guys in that industry and the big guys are playing with government money now. I would want to look at their management team, production team and their strategy as how to co-exist with EV’s from the big three before I would even remotely consider AZD-t. Besides the adage is “Sell on News” not “Buy on News”.

Now what Azure has going for it is that it looks like Ford is using their power trains to convert their truck and vans to EV’s for the commercial market. From that perspective, it has a chance of being bought out by Ford in the future but unless they have some proprietary technology, that isn’t going to happen. Remember AZD-t reported negative earnings and for them a ten unit order is a big deal. I’d view AZD-t as a lottery ticket but a good cheap lottery ticket.

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