SnowFall Futures

Good Timing: After the recent snowstorm in the Northeast, the Chicago Mercantile Exchange coincidentally announced it will begin listing and trading snowfall futures and options beginning Sunday night, February 26. The snowfall futures will allows investors to manage their weather-related risk. The contracts will trade on a monthly basis from October through April. Monthly snowfall is defined as the sum of daily snowfall values for a particular location for a calendar month.

As an avid skier (I grew up in Lake Tahoe - its compulsory) my first reaction was that ski areas will be the primary users of these derivatives. CME Snowfall futures, however, will only be offered (at least initially) for Boston and New York.  Not exactly skiing meccas. 

The contracts will allow the management of municipal snow removal budgets, holiday retail sales, tourism, etc.  Snowfall, or lack thereof, can have a major impact on local and regional economies. And perhaps in the future the exchange will be trading snowfall futures in skiing regions so I can better manage the risk of not having any snow on my ski vacations.

Comments

[david giacalone]

This is very interesting, Martin. Is there going to be a similar Ice Futures instrument? Much of Vermont and New Hampshire depends on ice-related business from tourists and residents and their season is a total flop this year. Winter Festivals in New York have also been ruined by unfrozen lakes.

[he who is known as sefton]

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http://hewhoisknownassefton.blogspot.com/2006/02/bubba-da-prez-intryode-evolutionary.html

toodles
....../
.he who is known as sefton

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