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.

RELATED TERMS
  1. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  2. Short (or Short Position)

    A short position is the sale of a borrowed security, commodity ...
  3. Backwardation

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

    A situation where the futures price of a commodity is above the ...
  5. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  6. Futures

    A financial contract obligating the buyer to purchase an asset ...
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. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  3. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  4. Options & Futures

    Five Advantages of Futures Over Options

    Futures have a number of advantages over options such as fixed upfront trading costs, lack of time decay and liquidity.
  5. Options & Futures

    Contango Versus Normal Backwardation

    It’s important for both hedgers and speculators to know whether the commodity futures markets are in contango or normal backwardation.
  6. Investing Basics

    What Does Contango Mean?

    Contango​ is when the futures price of a commodity is higher than the expected future spot price.
  7. Options & Futures

    The Short Guide To Insure Stock Market Losses

    The best ways to hedge against losses are to diversify your portfolio and to use a variety of options.
  8. Term

    How Points Relate to Financial Instruments

    Points usually refer to the measurement of some change in a financial instrument’s value.
  9. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  10. Mutual Funds & ETFs

    (GLD, DGL, IAU) 3 Bond ETFs in the Gold Sector

    Find out more about the top ETFs that track the gold sector, such as the SPDR Gold Shares ETF, the PowerShares DB Gold ETF and the iShares Gold Trust ETF.
RELATED FAQS
  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. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  4. 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 >>
  5. Can mutual funds invest in options and futures? (RYMBX, GATEX)

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  6. 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 >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center