Futures Strip

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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.

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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. How are commodity spot prices different than futures prices?

    Commodity spot prices and futures prices are different quotes for different types of contracts. The spot price is the current ... Read Full Answer >>
  4. How do commodity spot prices indicate future price movements?

    Commodity spot prices indicate future price movements because commodity futures prices are calculated using spot prices. ... Read Full Answer >>
  5. Where did market to market (MTM) accounting come from?

    Mark to market accounting has been around in concept since the stock market began; however, it was not officially part of ... Read Full Answer >>
  6. Why is market to market (MTM) accounting considered controversial?

    Mark to market accounting has been an integral component of generally accepted accounting principles (GAAP) in the United ... Read Full Answer >>
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