Capped Option(redirected from Capped Options)
An option contract that establishes a maximum profit for the holder. Capped options contain a provision stating that the option is automatically exercised if the underlying security closes on a trading day above (for a call) or below (for a put) some established price. This means that if the underlying security moves in a direction disadvantageous for the writer, there is a maximum amount the writer can lose. A capped option is also called a capped-style option.