Caput

AAA

DEFINITION of 'Caput'

A type of exotic option that consists of a call option on a put option. Essentially, a caput gives the holder the right to purchase another option. This type of option is also known as a "compound option".

INVESTOPEDIA EXPLAINS 'Caput'

The holder of a caput option has the right to purchase a specific put option in the event that the price of the underlying asset declines. The disadvantage of a caput option is that it only trades over the counter, so it is not as easy to get into a position with caput options as with regular vanilla options.

RELATED TERMS
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) ...
  2. Compound Option

    An option for which the underlying is another option. Therefore, ...
  3. Exotic Option

    An option that differs from common American or European options ...
  4. Vanilla Option

    A financial instrument that gives the holder the right, but not ...
  5. Over-The-Counter - OTC

    A security traded in some context other than on a formal exchange ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
Related Articles
  1. Options Basics Tutorial
    Options & Futures

    Options Basics Tutorial

  2. What do all of the letters in a stock ...
    Options & Futures

    What do all of the letters in a stock ...

  3. What's the difference between a regular ...
    Options & Futures

    What's the difference between a regular ...

  4. 20 Tools For Building Up Your Portfolio
    Options & Futures

    20 Tools For Building Up Your Portfolio

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center