In order to fund these activities, they sell shares in their companies for attractively low prices in the hopes that they indeed find marketable quantities of the resource in question. In the event that they do indeed find what they are looking for, the value of the company increases by many factors resulting in amazing returns for investors. These stocks are incredible volatile for three main reasons: the first is that they are already trading in ‘pennies’ so a one penny increment can represent an enormous percentage difference in price.

Secondly, as investors await word from geophysical tests and explorations, the price is incredibly vulnerable to rumours of all kinds that one or another investor may feel is or is not applicable to the success or failure of that particular company.

The third reason that these stocks are so volatile is that they are often traded at incredibly small volumes leading them to be incredibly susceptible to buy or sell requests from speculators.

Unfortunately, these stocks are also vehicles for dishonesty and insider trading. In the case of BRE-X, for example, the stocks price increased by many multiples on news that resources were found that would result in unprecedented profits. Such news gave an incredible injection of positive will towards the company and many people invested their entire life’s savings, only to find that these results were fraudulent and that the company did not in fact have any basis for their reports, but making millions of dollars for those responsible in the meantime as they allowed their stocks to increase in value, and selling before the collapse was exposed. Caution should always be practiced when buying and selling penny stocks.