Futures Strip

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Backwardation

    A theory developed in respect to the price of a futures contract ...
  2. Contango

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

    Making an investment to reduce the risk of adverse price movements ...
  4. Futures

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

    1. The buying of a security such as a stock, commodity or currency, ...
  6. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
Related Articles
  1. What is the difference between options ...
    Options & Futures

    What is the difference between options ...

  2. How are futures used to hedge a position?
    Investing

    How are futures used to hedge a position?

  3. Futures Fundamentals
    Insurance

    Futures Fundamentals

  4. Stock Safety: Top 3 Ways to Limit Your ...
    Options & Futures

    Stock Safety: Top 3 Ways to Limit Your ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center