Contract Split

A contract split occurs when a single financial contract, such as an options or futures contract, is divided into two or more smaller contracts. This process can take place for a variety of reasons, such as adjusting the contract size to accommodate smaller investors or aligning with changes in the underlying asset, like stock splits. A contract split does not change the overall value of the position but adjusts the size and number of contracts to make trading more accessible or flexible.

Example

If a stock undergoes a 2-for-1 split, an options contract that previously controlled 100 shares may be split into two contracts, each controlling 50 shares, to maintain the same overall exposure.