Definitions

Capping

Posted By: TradersLog

(1) Effecting transactions in an instrument underlying an option shortly before the option’s expiration date to depress or prevent a rise in the price of the instrument so that previously written call options will expire worthless, thus protecting premiums previously received. See also: Pegging.

(2) Exercising selling pressure on a stock in an effort to keep its price low or to move its price lower, in violation of NASD rules.

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