What type of style options are exercised automatically when a security reaches a specified price?

The correct answer is C. European style options.

European style options are designed so that the holder can only exercise the option at its expiration date, which means that they will be executed automatically only when a specified price is reached on that particular date. This contrasts with American style options, which allow for exercise at any point before or on the expiration date, providing more flexibility for the holder.

Capped style options are those that have a limit on the maximum payout and do not pertain specifically to the exercise mechanism in relation to reaching a specified price. Digital style options provide a fixed payout if a certain condition is met, but they do not usually operate on the exercise model described in this question.

Understanding the characteristics of these different option styles is crucial for evaluating investment opportunities and making informed trading decisions.