Capping is when selling pressure is placed on a stock (or another asset) to either lower the price or keep the price low.
Capping is a strategy to game the market when someone has written a call option on an asset they are otherwise long on. Say you hold a lot of a stock (that's what it means to "be long"). You write a call option on that stock, meaning someone else pays you for the right to buy the stock at a pre-arranged price. The call option has an expiration date, so if the stock stays below the call's strike price by the expiration date, the option will end up worthless.
In capping, the person who wrote the option will sell a sizable amount of the stock they own in order to create downward pressure on the stock. They are thus capping its price. If it works out, the option will expire without getting exercised.
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Finance: What is a 12b1 fee?91 Views
Finance a la shmoop.. what is a 12b1 fee what a clever name like why don't they give
normal names to these things like fund admin expense fee or just name it Bob [Document with Bob written at the top]
but they don't so you just have to memorize what they mean anyway
mutual funds had to bear enormous communications related expenses in the
pre computer-internet everyone has an email address era delivering gobs of [Mail man arrives at house]
paperwork snail mail to its customers it was enough expense to them that well
they frankly just hated doing it and did more or less anything they could to [Man licking envelopes]
avoid having to deliver you know dead trees so along came the investment
advisors act of 1940 which basically recognized that mutual funds did in fact
have expenses that were more than bonuses to the senior partners the 12b1
fee system allowed a fairly set and standard amount of fees to be charged to
customers so that a given mutual fund could recoup the money it had to spend [Fund statement document appears]
mailing annual reports and performance data and tax information and all kinds
of other things to its customers the 12b1 system was basically a
pass through set of charges such that the customer paid for her own paperwork
incentivizing mutual funds to actually do a good job communicating with their [Woman receiving a trophy on stage]
constituency and it let the little guy mutual funds compete against the big guy
mutual funds who already had all that infrastructure of course the biggest
winner out of this entire deal yeah it was the trees especially the ones who [Tree given a first prize award]
got in early on Google
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