I've watched financial news off and on for the past several decades. I don't recall ever hearing "strips" until recently; now every talking head opining on fossil fuel mentions "strips." I'm sure the word was used all these years by a select few and maybe I simply missed it ... it's like seeing a new word for the first time and then seeing it everywhere ... maybe that's all it is. Something I missed ...
The "strip" price is nothing more than the "arithmetic" average of all the prices over a specified period of time.
"Arithmetic": add up all the prices and divide by the number of individual data points.
Generally only used with fossil fuel energy; perhaps most often used by Guy Adani over at CNBC. Not to be confused with strip malls or strip clubs.
Generally only used when you want to sound like you know what you are talking about.
This should help:
- how to calculate volatility with spot and strip prices, Motley Fool, May 10, 2017.
- how to calculate annualized volatility, Motley Fool, October 20, 2016.
- roll yield defined, Investopedia, July 9, 2021 (note how recent this article was posted)
