Strip price
The strip price is a term that is mainly used in energy markets and refers to the price of a futures strip. A futures strip is the simultaneous purchase (or sale) of futures with sequential delivery months -- for the same underlying commodity, of course. For example, at the time of writing, buying the NYMEX 12-month natural gas strip would entail buying the May 2016 futures, the June 2016 futures, and so on through April 2017.
Futures strips are actively traded as a stand-alone product; i.e., there is a quoted price at which you can buy or sell the strip directly without having to purchase all the individual futures separately. The strip price is the arithmetic average of the individual futures that are part of the strip.
How to calculate volatility with spot and strip prices
Volatility has a specific technical meaning in finance theory. The daily historical volatility of any price series -- whether spot prices or strip prices -- is equal to the standard deviation of daily returns.
(You could also calculate the monthly volatility using monthly prices.)
In financial markets, people usually refer to volatility in annualized terms, so the sum of squared deviations is adjusted by a factor of 252, which represents the approximate number of trading days in a year. If that sounds obnoxiously complicated, I invite you to consult another page, How to Calculate Annualized Volatility, which walks you through the calculations step by step.
Related investing topics
