It is estimated that nearly 20 percent of the U.S. economy is directly affected by the weather. As a result, the earnings of businesses can be adversely impacted by summers that are hotter than normal or winters that are much colder than anticipated. Conversely, revenues of power providers and utilities can suffer from either balmy summers with less need for air conditioning or mild winters with less heating demand from consumers.

CME created a weather derivative market which enables those businesses that could be adversely affected by unanticipated temperature swings, to transfer this risk. Just as professionals regularly use futures and options to hedge their risk in interest rates, equities and foreign exchange, now there are tools available for the management of risk from extreme movements of temperature. This sector of hedging and risk management products represents today’s fastest growing derivative market.

• Weather Background has CME Contract Specs and Brochures that offer traders important information about CME Weather contracts.
• In Trading Weather, you can get the history of weather contracts at CME, CME weather benefits, vendor codes and block trading procedures.
• Getting Started offers trading information and details the steps necessary to open a futures account, as well as information on electronic trading on the CME Globex® platform. Also find out about the role a broker plays and get a list of questions to ask your broker that are designed to help you determine your trading needs and your broker’s capabilities.
• Weather Resources has links to important industry resources.