Definition of Capped Style Option

An option which has an established profit cap is known as a capped style option. These are also known as Protected Options.

Points to remember:

• A capped style option protects the writer from losing any amount greater than the predetermined amount.
• Capped style options are easier to exercise.
• They do not need the type of movement a standard option needs in order to get decent profits.
• This tool is mostly popular among hedge funds and implemented by hedge fund managers.