Split Block Pricing

AAA

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.

INVESTOPEDIA EXPLAINS '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. Limit Order

    An order placed with a brokerage to buy or sell a set number ...
  2. Bagging the Street

    An investor's failure to avoid trading in the stocks that are ...
  3. Tape Shredding

    When a broker divides an order for securities into a number of ...
  4. All Or None - AON

    A condition used on a buy or sell order to instruct the broker ...
  5. Immediate Or Cancel Order - IOC

    An order to buy or sell a security that if not immediately filled, ...
  6. Market Order

    An order that an investor makes through a broker or brokerage ...
Related Articles
  1. Principal Trading and Agency Trading
    Investing Basics

    Principal Trading and Agency Trading

  2. The Basics Of Trading A Stock
    Active Trading Fundamentals

    The Basics Of Trading A Stock

  3. Selling Premium As Small Caps Play Catch ...
    Options & Futures

    Selling Premium As Small Caps Play Catch ...

  4. Three Ways to Profit Using Call Options
    Options & Futures

    Three Ways to Profit Using Call Options

comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
Trading Center