Futures Strip


DEFINITION of 'Futures Strip'

The sale or purchase of futures in sequential delivery months in a single security. Strips allow investors to secure conditions such as yields for a period of time equal to the length of the strip.

BREAKING DOWN 'Futures Strip'

For example, a futures strip of four consecutive interest rate contracts would permit investors to lock into a similar rate for 12 months. A strip of eight consecutive (interest rate) contracts would serve to lock in a rate for 24 months. Futures strips may be used by companies or individuals as a hedge against fluctuations in other investments they may own that may vary when conditions, such as interest rates, change.

  1. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  2. Contango

    A situation where the futures price of a commodity is above the ...
  3. Backwardation

    A theory developed in respect to the price of a futures contract ...
  4. Short (or Short Position)

    A short position is the sale of a borrowed security, commodity ...
  5. Futures

    A financial contract obligating the buyer to purchase an asset ...
  6. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
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  1. What is the difference between options and futures?

    The main fundamental difference between options and futures lies in the obligations they put on their buyers and sellers. ... Read Full Answer >>
  2. How are futures used to hedge a position?

    Futures contracts are one of the most common derivatives used to hedge risk. A futures contract is as an arrangement between ... Read Full Answer >>
  3. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  4. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  5. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  6. 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 >>

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