Prop Trading Firms & Penny Stocks?

Discussion in 'Prop Firms' started by fbernar, Aug 17, 2011.

  1. fbernar


    Anyone know if this type of marriage works? A prop firm that allows you to trade pennystocks ($0.0001 price per share through $5.00 price per share)?

    I'm leaning towards no because of the commission being based upon per share; where if I buy 100,000 shares of a .0001 stock which totals $10, a commission of .004/share = $400.

    Anyone know if there are any that don't operate like that and are legit?
  2. yjcho03


    If your stock is cheaper than 0.001, very high chance that clearing fee you pay is more expensive than the stock iteself.

    Look for a retail account that charges you by % of dollar amount or stay away from cheap stocks.
  3. Penny stocks also face the problem of having low tradability and visibility, as well as volatility - their values can change drastically, whether or not it's in your favor.
  4. Just a point to make, that may make it easy to understand why prop firms don't engage in trading penny stocks (of course, they "can" - but most don't).

    Stocks under $5.00 require 100% margin, simply meaning that there is no leverage for penny stocks. You have $5,000, you buy 5,000 shares of a $1.00 stock, you have used up all your buying power.

    Just FYI...

  5. Don is correct. Also, for pennies you'd probably be better off with a firm that has per-ticket charges as opposed to per-share charges for commissions. This way purchasing large lots will not surpass the $5.99 or $6.99 fee or whatever they may charge.