Split Block Pricing

DEFINITION of 'Split Block Pricing'

The act of dividing a large order of financial securities into several smaller lots in order to allow each portion to be traded at different prices. The ultimate effect of using a split block pricing method is that the trader will receive the order at a price equaling the weighted average price of each block traded.

BREAKING DOWN 'Split Block Pricing'

In some cases, split block pricing would be used on a large trade order in order to match smaller positions desired by counter-parties to the transaction.

For example, a trader wants to sell 1,000 call options of XYZ corp, assuming that the only two buyers of the XYZ options want to buy 600 options at $5.00 and 400 options at $5.05; the order will be split into two blocks of 600 and 400 contracts (each representing 100 shares), respectively and the selling trader would receive proceeds of $502,000 ((400 x $5.05 x 100) + (600 x $5.00 x 100)).

RELATED TERMS
  1. Block Trade

    An order or trade submitted for sale or purchase of a large quantity ...
  2. Block Order

    A signficant order placed for sale or purchase of a large number ...
  3. Block

    A large amount of the same security bought or sold by institutional ...
  4. Distribution Stock

    Distribution stock refers to a large block of a security which ...
  5. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network ...
  6. Exchange Distribution

    A type of trade made on the floor of a securities exchange in ...
Related Articles
  1. ETFs & Mutual Funds

    Understanding Block Trades

    A block trade is the sale or purchase of a large quantity of securities.
  2. Investing

    Stock Splits: A Closer Look At Its Effects

    Most trades, including short sales and options, aren't materially affected by a stock split. Still, it's important for shareholders to understand how these events impact various aspects of investing. ...
  3. Investing

    Understanding Stock Splits

    We explain what they are, the thinking behind them as well as their results.
  4. Markets

    Do Stock Splits Cause Volatility?

    Since stock splits decrease the stock price, do they also increase volatility because shares are traded in smaller increments? Investopedia examines assumptions about this increasingly common ...
  5. Trading

    The Basics Of Trading A Stock

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  6. Investing

    H&R Block Stock Trades Ex-Dividend Thursday (HRB)

    H&R Block will send its dividend payment on July 1 to shareholders of record as of June 20.
  7. Markets

    Explaining Market Orders

    A market order is the most common order used to purchase a financial security.
  8. Investing

    If You Had Invested Right After Amazon's IPO

    Find out how much you would have made if you had invested $1,000 during Amazon's IPO, including how the power of the stock split affects investment growth.
  9. Trading

    Don't Let Stock Prices Fool You

    Find out why a stock with a six-figure share price can still be a good value.
  10. Markets

    H&R Block to Lay Off 250 After Weak Tax Season

    For obvious reasons, the period of the year running through mid-April is when tax preparation specialist H&R Block makes most of its money. That's why the company's stock price took a hit last ...
RELATED FAQS
  1. If I owned stock that split last year, how does this affect my taxes?

    Find out why standard stock splits do not change the value of an investor's portfolio and are unlikely to directly affect ... Read Answer >>
  2. What happens to a stop order after a stock splits?

    A stop order, commonly referred to as a stop-loss order, is an order placed with a broker to sell a security when it reaches ... Read Answer >>
  3. I own options on a stock, and it's just announced a split. What happens to my options?

    When the underlying stock of your option splits or even begins issuing a stock dividend, the contract undergoes an adjustment ... Read Answer >>
  4. How and why does a stock split?

    Learn why stock splits do not occur very often for individual stocks, and understand the impact of reverse stock splits on ... Read Answer >>
  5. Does a stock split lead to the gapping up/down of the stock?

    If a company splits its stock, there will be no gapping of the stock due to the split itself. A stock split does not materially ... Read Answer >>
  6. What is the difference between a stop and a market order?

    Learn about market orders and stop orders, how they are used and executed, and the main difference between stop orders and ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center