What does Futures Strip mean?
A sequence of futures contracts for consecutive months traded as a single transaction. It is the sale or purchase of futures in sequential delivery months but in one single security. This helps in planning operations and cash flows. For example, Interest rate future strips enables an investor to lock the yield for a time frame equal to the length of the futures strip.
Futures Knowledge Explains Futures Strip
Future strip is a common term used in energy futures market. The 12-month natural gas futures strip, the average price of the next 12-months month-wise futures contracts, is widely traded. In June 2015, the Natural Gas 12-month futures strip, which averages the July 2015 through June 2016 prices, traded at around $3.10/MMBtu as a single security, while spot price was $2.90/MMBtu. This is an indication of natural gas price may go up.