What is A Capped Option?
A capped option will be automatically exercised prior to expiration if the options market on which the option is trading determines that the value of the underlying interest at a specified time on a trading day “hits the cap price” for the option. Capped options may also be exercised, like European-style options, during a specified period before expiration.
This period is the expiration date for all capped options traded at the date of this document. The special terminology applicable to capped options is discussed at the end of this chapter.
European-style or capped options having an expiration period that is longer or shorter than their expiration date may be introduced for trading in the future.