Futures Strip

Futures investing can be rewarding, but also comes with some drawbacks. One of them is that we have to be on the ball and pay attention to our futures’ expiration dates so we can buy and sell to our maximum advantage. We can’t procrastinate or space out, or we might end up losing oodles of money. But for folks out there thinking, “ain’t nobody got time for that,” don’t walk away just yet—there is another way: futures strips.

Futures strips allow us to buy a bunch of futures with different expiration dates all at once. For example, if we’re really feeling like OJ is going to take off (the juice, not the Simpson), we can buy an orange juice futures strip. If we buy, say, a six-month strip with six set maturity dates, it’s basically like buying six consecutive OJ futures, all connected in a strip, like candy buttons. This enables us to lock in a price for the duration of the strip, and when each candy button expires, the next one is automatically eaten. Er, purchased.

Futures strips, like ordinary futures, can be held long or short, depending on whether we think the price of the future in question is going to rise or fall. If we’re pretty confident about how a specific derivative is going to perform over the next long-ish term, then futures strips might be a good way to capitalize on that confidence.