A CAPS “option” in which a maximum level is placed on the payout in the form of a specified points higher. In the event the underlying closes, at any time during the option’s life, at or through the higher strike, i.e., more than the specified points above the strike price, the option is automatically exercised. If the option is not exercised before maturity, it will be automatically exercised at expiration. This option gives investors the opportunity to participate in upward movements on a stock index (S&P 100 and S&P 500) to a pre-set level.

Call CAPS are initially listed with an at-the-money strike price and a capped price that is 30 points higher. With call CAPS, a single contract is established to constitute two same-expiration index calls where the strike prices are at a 30 point distance from each other.