Cramer's 'Mad Money' Recap: On Speculation

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Editor's note: This is a recap of a broadcast that originally aired on Aug. 10, 2005.

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For those interested in speculation, Jim Cramer offered more tips on where and how to find the best opportunities during his "Mad Money" show on CNBC.

Having already covered some of the main points on a prior show, Cramer said he wanted viewers to "speculate like you mean it."

Among the many emails he receives, Cramer said a significant number of them are from investors with questions about penny stocks, companies with no earnings or issues trading on the Pink Sheets, a loosely regulated trading system that handles mainly small firms.

Avoid those, along with the names traded by way of the over-the-counter Bulletin Board, he said. "There's a sweet spot in the speculation business -- the $2 to $10 spot," he said. "This is where you'll make all the money."

Should there be a stock that interests an investor but trades above $10, "you might want to consider using options to speculate." As for the names under $2, "the company is probably managed by incompetents," he said. "Don't waste your time with anything under $2."

Cramer cautioned that many stocks on which one speculates will become worthless, but they should be balanced out by the picks that more than make up for the weak performers.

As on the previous show, Cramer emphasized that speculation must be done only with discretionary money -- that is, money that won't be missed if it's lost -- and never money in a retirement account.