How do you & or would you ever want to trade the " Weather " ...... Frost, Hurricane, RainFall, SnowFall, Temperature? I just now saw this on the CME website, and am curious as to how you would trade these ? Thanks
I am sure insurance companies do for hedging purposes and there is also a fund out of Bermuda ( Nephila Capital) that specializes in this. I am guessing there are others...
Yep, I'm with @dealmaker. My guess is mostly insurance companies, and perhaps farmers, real estate firms, home builders and others can use these futures to hedge their exposure. There are a lot of folks with proprietary weather tracking / prediction models who may take the other side as market markets.
Companies who have weather risks. A finance prof once told us that Foxwoods casino had to buy rain derivatives to hedge revenues per a bond covenant.
All the answers so far are to the question "who trades these". Anyone have an answer on the first part of the question, "how do you trade these"? I don't see them available at my broker (optionsxpress), and a quick scan of some other retail brokers don't show them as available trading products either. How would your typical farmer go about availing themselves of these?
Speak with your broker. I suspect they're on a CME channel few brokers bother listening to on their gateway. I can pull them on my TT screen by typing in "cooling". http://www.cmegroup.com/trading/weather/
Thank you for everyone's Replies , That makes a lot of since now So are there actual way that we as Traders could Go Long or Short the various Weather conditions ? Trade Futures on them ? Trade Options on them ?
This stuff doesn't even really trade so the discussion is entirely academic: http://www.cmegroup.com/market-data/volume-open-interest/weather-volume.html
Sig these are primarily OTC products that get posted on the exchange. Heating and cooling days are crucial to the natural gas and power markets.