A capped option that constitutes a long put position in which a cap is placed on the maximum payout of the put. This put provides for a fixed participation in the fall of an underlying, and hence its structure is similar to that of a position in a vertical bear spread. The capped put could also refer to a long put with a specific strike combined with a short put at a lower strike, both generally with the same expiration date. If the underlying drops, the first put gets in the money. However, if it falls below the strike of the short put, the profit will be limited to a certain cap.
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