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EPS100Momentum (71.59)

I can't stand Losing points in Caps

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August 04, 2010 – Comments (3) | RELATED TICKERS: ANAT

Especially when I picked a good stock that went up almost 20 points and I still have negative points on it from caps.

ANAT went $66.98  to $80.41 for me but still I can't rack up positive points on it. 

Should I just close it, cause I hate losing points?

3 Comments – Post Your Own

#1) On August 04, 2010 at 1:26 PM, MegaEurope (< 20) wrote:

I wouldn't close it for that reason.  I would close it because there are other insurers that are cheaper and better.

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#2) On August 07, 2010 at 9:51 AM, dwot (99.87) wrote:

I know the frustration...

When the market crashed I had tons where underperform and getting out of the stock was the right choice but they didn't under perform to the over all degree of the stock so they were giving negative points.  It really turned me off playing caps.

That is actually my biggest critism of caps, I think the down side comparison should be zero return, as in the money is out of the market, not that the market went down 20% and your stock only went down 15% so you lose in caps from saying you ought not have bought it.

Not losing your money definitely outperforms losing it.

The upside is a little different, you still make money on picks that gain, but you make less money then a pick that outperforms the market, so I can see the logic in the negative points on the upside when you just didn't make as much money as other picks.

With caps, correctly picking that you should not be in the stock you can actually lose in caps.  There is little reward in caps for correctly calling a bear correction, and bear corrections can completely wipe out your financial plan.  I suffered gross financial stress for almost ten years from my losses in the tech bubble and if it had not been for the more recent bubbles and my recognition of them for what they were and using them to my benefit this time, I'd have never financially recovered from it.

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#3) On August 07, 2010 at 10:18 AM, Lostromo2 (< 20) wrote:

CAPs is a measure of underperformance/outperformance, nothing more, nothing less.  It is not supposed to measure monetary performance, or to reward you for getting the price direction correct.  It only monitors percentage based RELATIVE price performance.  It is not a portfolio simulator.   There are plenty of portfolio simulators out there like UpDown.com that will measure performance based on a hypothetical portfolio of say $100,000.  CAPS is not that.  If you greenthumbed a stock and it goes down 15%, and the market went down 20%, congrats!  You beat the market... you're awarded 5 caps points, even though your stock went down.   Now if you had redthumbed it, you'd have negative 5 points, even though you had the direction right.    This is the single biggest confusion factor I think at this site.    Just look at the RELATIVE price performance of your pick VS. the SP500, that is the focus of CAPS, not if you got the direction right.  IMO, the real criticism of CAPS is the accuracy factor, which encourages you to hold on to losers and cut winners quickly. 

If you can come to terms with what CAPs actually does, rather than what you think it should do, maybe it'll cause you to stomach your results a little better.

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