A reader sent me this article about companies betting on snowfall:
“With record amounts of snow blanketing even some of the warmest cities across the nation this winter, an increasing number of companies are protecting themselves by betting on …. snow.
Unexpected blizzards and snowstorms can cost companies thousands of dollars in lost business each year.
“People have tended to have a fatalistic view of weather,” said Tim Andriesen, managing director of Agricultural Commodities at CME Group. “Now more and more people are recognizing that while you can’t control the weather, you can at least manage the financial impact of it.”
The Chicago Mercantile Exchange, which began offering snow futures in 2006, has already sold five times more contracts this year than last year. While only 62 contracts were purchased in 2009, a whopping 317 have been bought so far this year.
Investors usually lock in snowfall contracts in September and October. Last fall, for example, a company could pay $10,000 for a contract that paid $50,000 if there was more than 50 inches of snow.”
Not the most bizarre hedging contract I’ve seen, but I was surprised to learn the CME has standardized them.