What Are Penny Stocks? A penny stock is a specific type of share that is priced very low. They have a lot of specific benefits, but they aren't for everybody. They can bring about huge returns, but it is equally possible that they will make you lose your entire investment. According to the SEC, a penny stock is a stock traded below $5. When they were first developed, they traded at less than $1, which usually represented small startup companies that were trying to get a foot in the door.