A CAPS “option” in which a maximum level is placed on the payout in the form of a specified points lower. In the event the underlying closes, at any time during the option’s life, at or through the lower strike, i.e., more than the specified points below 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 downward movements on a stock index (S&P 100 and S&P 500) to a pre-set level.

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