What does 'Futures Strip' mean

Futures strip is 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.

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