Posted in Finance, Accounting and Economics Terms, Total Reads: 375
Definition: Split Close
This condition occurs in a Futures contract. A Futures contract is one where two parties agree to buy or sell a commodity or share at a certain date in the future. It is a contract between two parties to deliver the asset at a predetermined price. Futures are contracts to buy/sell a specified quantity of financial instruments/commodities.
A Split Close occurs when two future contracts of the same commodity having different maturity dates have different prices during the same trading day. It can be explained as the price difference in the final futures transaction at the end of the trading session.
Consider two futures contracts based on Exchange rate of Rs./ $ having maturity dates of June and October. On a particular trading day, the closing rates are different. This price difference is termed as a Split Close.