New York (HedgeCo.net) – Global risk manager and derivatives marketplace, CME Group, will begin listing and trading rainfall futures, options on futures and binary options beginning October 31 for trade date November 1. The monthly and seasonal contracts will be based on the CME Rainfall Index and will be available March through October.
“We see the impact of weather every day in our lives and we know how it can influence regional and local business decisions – whether to raise prices, divert inventory or result in temporarily closures,” said Tim Andriesen, CME Group’s Managing Director of Agricultural Commodities and Alternative Investments. “A significant number of industries, from agribusiness to recreation, are reliant on good weather, but also are at the mercy of bad weather. Rainfall contracts, in conjunction with our existing suite of weather products, will allow these businesses to manage the resulting risk.”
“CME Group’s commitment to expand their product offerings in the weather space has enabled our clients to gain access to financial risk mitigation tools previously only available to large, commercial end-users in the over-the-counter market,” said Jeff Hodgson, President of Chicago Weather Brokerage. “The rainfall contracts are a viable hedging tool for large agricultural market participants, as well as smaller industries that are equally affected by weather.”
The rainfall contract locations include Chicago O’Hare International Airport, Dallas-Fort Worth International Airport, Des Moines International Airport, Detroit Metro Airport, Jacksonville International Airport, Los Angeles Downtown USC Campus, New York LaGuardia Airport, Portland International Airport and Raleigh/Durham International Airport.
CME Group’s weather product suite offers trading opportunities related to rainfall, temperature, snowfall, frost and hurricanes. The products are based on a range of weather conditions in more than 47 cities in the United States, Europe, Canada, Australia and Asia, with the hurricane products geared to nine U.S. regions.
The futures and options on futures contracts enable market participants to manage exposure to rainfall. The binary options enable users to manage the ramifications on businesses or other operations if rainfall is more or less than anticipated. Binary options provide the options holder with a fixed dollar payout upon exercise. If the option expires without being exercised, the holder’s losses are limited to the amount paid for the binary option.
Editing by Alex Akesson
