Stocks priced below $10 a share can be a mixed bag. Low share prices are often indicative of companies with poor fundamentals, a weak near-term outlook, and a large number of outstanding shares. These types of equities, in turn, tend to be exceptionally risky and highly volatile from a price standpoint. But there are a few significant upsides to buying stocks in the $5 to $10 range.
Low-priced equities, on occasion, can deliver substantial returns on capital within an exceedingly short period. What's more, it's far easier to build a position in round lots of 100 shares at a time. By doing so, investors can reduce their risk profile and generate immediate cash from the position by selling call options. While selling calls can cap the maximum return from a low-priced equity, this strategy also ensures that you won't walk away empty-handed in a worst-case scenario.
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Source Fool.com