Penny stocks are considered highly speculative (and high risk) investments due to their lack of liquidity, large bid-ask spreads, small capitalization and limited filing and regulatory standards. Still, some investors like to trade penny stocks because the low price makes it possible to hold thousands of shares for a relatively small amount of capital – and all those shares mean investors can profit with the gain of just a few cents per share.
While many brokers offer penny stocks, some add a surcharge to stocks that trade below a certain dollar level or volume restrictions that bump up the price for large orders. We selected these five brokers as the best for penny stocks:
- Interactive Brokers
- TradeStation
- eOption
- Fidelity Investments
- Charles Schwab
Low-priced securities cannot be held in custody at the Depository Trust Company (DTC) and, may carry pass-through charges that can be as high as 10 times the value of the trade itself. Non-DTC eligible securities cannot be cleared electronically. Exchanges such as NYSE and Nasdaq require DTC-eligibility, but it’s up to you to determine the eligibility of penny stocks trading on the OTC Bulletin Board and OTC Markets Group (a current list can be found on the DTCC website).
Our criteria for putting a broker on this list includes access to the OTC markets, low account minimums, flat rate per-trade commissions with no additional charge for low-cost stocks. We also look for real-time margin calculations so you're aware of your buying power.
Interactive Brokers
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Interactive Brokers' very low per-share trading commission of $.005 ($1 minimum per trade) and up-to-the-split-second real-time margin calculations are ideal for penny stock traders.
Interactive Brokers also received awards for Best Overall Online Brokers, Best for International Trading, Best for Low Costs, Best for Options Trading and Best for Day Trading.
Pros
Low commissions, maximum 1% of trade value
Streaming real-time data, including account information
IBot, IB’s AI-powered online assistant, can help find features
Cons
Data streams on only one device at a time
Traders Workstation puts up a steep learning curve
TradeStation
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- Account Minimum: $500 ($5,000 for IRA)
- Fees: $5 stocks and ETFs, $0.50/contract and $5/trade options
The more shares you trade per month, the lower your fees at TradeStation. All data streams in real time. You can place, modify, and cancel trades from charts or by using keyboard shortcuts.
TradeStation also received awards for Best Overall Online Brokers and Best for Day Trading.
Pros
Flexible and customizable real-time market scanners
Excellent charting and technical analysis capabilities
Per-share fees drop as you trade more shares
Cons
Steep learning curve for setting up trading strategies
Multiple pricing plans offered may be confusing
eOption
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eOption's flat $3 per trade pricing can keep your costs down. Their low-cost, no-frills web platform offers speedy executions but few creature comforts. You can connect to their trading engine using Sterling Trader Pro or DAS Trader if you want better charting and analysis, though that will cost $230 monthly. Some OTCBB trades must be placed with a live broker, for an additional $6/trade fee.
eOption also received awards for Best for Low Costs.
Pros
Can auto-trade newsletter alerts
Easy to use web platform
Cons
Some OTCBB trades must be placed with a live broker
Limited education offerings
News and research is limited
Fidelity Investments
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- Account Minimum: $0
- Fees: $4.95 per stock/ETF, $4.95 plus $0.65/contract per options trade
Fidelity's overall excellent research can help you screen for penny stocks by market sector. Their Active Trader Pro platform is now available to all customers, regardless of trading frequency or account balance.
Fidelity also received awards for Best Overall Online Brokers, Best for Beginners, Best Stock Trading Apps, Best for ETFs, Best for Roth IRAs, Best for IRAs, Best for International Trading, and Best Web Trading Platforms.
Pros
Access to Active Trader Pro for all customers
Excellent trade executions on listed stocks
Stock screeners help you find potential trades
Cons
Non-U.S. citizens and residents cannot open an account
Finding a tool may require using more than one platform
Charles Schwab
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- Account Minimum: $0
- Fees: $4.95 per stock and ETF trade, $0 for Schwab ETFs and $4.95 plus $0.65 per contract for options
Schwab's research pages point out the exchange on which a stock trades, which will keep you informed of the inherent risk. There are a variety of platforms available; the StreetSmart platforms have customizable charting and streaming real-time quotes.
Charles Schwab also received awards for Best Overall Online Brokers, Best Web Trading Platforms, Best for International Trading, Best for Options, Best for Beginners, Best for Roth IRA, Best for IRA, Best for ETFs, and Best Stock Trading Apps.
Pros
Mobile apps synch with desktop platforms
Schwab Satisfaction Guarantee offers refunds for trading fees
Flat fees with no hidden surprises
Cons
May have to use more than one platform to use the tools you like
Margin rates are higher than average
Regarding the other brokers we surveyed, Robinhood and tastyworks do not allow OTCBB trades. Ally Invest and SogoTrade apply surcharges to trades of stocks of under $1 per share, which can significantly add to your trading costs. Lightspeed charges a flat $10 per OTCBB transaction, which is much higher than average.
Interested in making penny stocks a part of your portfolio? Check out our guide to trading penny stocks before you jump in.
Methodology
Investopedia’s mission is to provide investors with unbiased, comprehensive reviews and ratings of online brokers. Our reviews are the result of six months of evaluating all aspects of an online broker’s platform, including the user experience, the quality of trade executions, the products available on their platforms, costs and fees, security, the mobile experience and customer service. We established a rating scale based on our criteria, collecting over 3,000 data points that we weighed into our star scoring system.
In addition, every broker we surveyed was required to fill out a 320-point survey about all aspects of their platform that we used in our testing. Many of the online brokers we evaluated provided us with in-person demonstrations of their platforms at our offices.
Our team of industry experts, led by Theresa W. Carey, conducted our reviews and developed this best-in-industry methodology for ranking online investing platforms for users at all levels. Click here to read our full methodology.