Split Close

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DEFINITION of 'Split Close'

A situation that refers to price differences within a series of final daily futures-contract transactions occurring at the close of a trading session. A split close occurs if more than two contracts with the same underlying, trade at different prices during the final minutes of the markets. Split closes are a common occurrence on futures exchanges.

BREAKING DOWN 'Split Close'

A split close happens when contracts with the same underlying instrument, but different maturity dates, have different closing prices. A futures contract is a type of derivative instrument in which a buyer and seller agree to transact a set of financial instruments or physical commodities for future delivery at a specified date and price.


A number of contracts are available at any one time for a particular instrument, based on the month that the contract expires. For example, the contract months for corn futures are March (H), May (K), July (N), September (U) and December (Z). If the March and May contracts have different closing prices, a split close occurs. For example, a split close also happens if a July corn contract has a positive gain at the close, while a September corn has a loss.

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RELATED FAQS
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    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  2. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  3. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  4. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  5. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
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