A capped call which has the features of an American option (American-style option). More specifically, it is a call option that gets automatically exercised if and when the underlying asset breaks through a certain maximum level (i.e., beyond the cap price) anytime during the lifetime of the contract (American exercise). This option is subject to a preset profit cap to the advantage of the option writer. That is, it helps the writer limit his losses (in case the underlying price keeps increasing) up to a specific level.
August 10, 2024
