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. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  2. Hedge

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

    A financial contract obligating the buyer to purchase an asset ...
  4. Contango

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

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

    A short position is the sale of a borrowed security, commodity ...
Related Articles
  1. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  2. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  3. Investing

    Oil: Why Not to Put Faith in Forecasts

    West Texas Intermediate oil futures have recently made pronounced movements. What do they bode for the world market?
  4. Economics

    Is the U.S. Economy Ready for Liftoff?

    The Fed continues to delay normalizing rates, citing inflation concerns and “global economic and financial developments” in explaining its rationale.
  5. Mutual Funds & ETFs

    The Risks of Investing in Inverse ETFs

    Discover analyses of the risks inherent to inverse exchange-traded funds (ETFs) that investors must understand before considering an investment in this type of ETF.
  6. Mutual Funds & ETFs

    Top 4 Inverse Equities ETFs

    Explore analysis of some of the most popular inverse and leveraged-inverse ETFs that track equity indexes, and learn about the suitability of these ETFs.
  7. Investing

    2 Sectors to Explore When Rates Rise

    While the market selloff and declining inflation expectations have lowered the probability of a Fed rate rise, U.S. economic data still supports it.
  8. Investing

    Ideas for Your Bond Portfolio When Rates Rise

    It has been nearly 10 years since the Fed last raised interest rates, and though the central bank didn’t hike rates this month, they look to be coming.
  9. Investing News

    Friday Intel: PPI and The Fed

    Markets were relatively quiet overnight with U.S. stock market futures pointing to a modestly lower open, down around 0.35%.
  10. Mutual Funds & ETFs

    ETF Analysis: United States 12 Month Oil

    Find out more information about the United States 12 Month Oil ETF, and explore detailed analysis of the characteristics, suitability and recommendations of it.
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!