Trading the weather

[granville]

Does anyone do this? The CME's weather futures seem to have some VERY extreme price fluctuations. Looks like an interesting market to trade.

 

[TWMPMM]

Speculation requires liquidity.

 

[granville]

yes, I concure... but the price moves from $10 to $180 and back down to $10 in nice trends during the course of a year.

I would think that liquidity is growing and so I wonder if anyone has tried this market. I don't know of any market that moves this much (without leverage).

 

[nazzdack]

Focus instead on weather sensitive markets, i.e. grains during the summer & livestock, orange juice and natural gas during the winter.

 

[Apex Capital]

Quote from nazzdack:

Focus instead on weather sensitive markets, i.e. grains during the summer & livestock, orange juice and natural gas during the winter.

Exactly.

I will predict that despite the current bearish fundamentals in the Beans, you will see the $10.80 highs of early 2004 taken out next Spring . . . and the spirited chant of "Beans in The Teens!!!" coming to a quote screen near you in the near future.

This will be the Trade of 2006.

 

[nazzdack]

I hope you're right............otherwise you'll have to change your name to AbyssCapital!

 

[granville]

OK, here's a monthly bar chart for the CME's Osaka Average Temperature future's contract:

I'm just starting to look at these, but DANG... they look beautiful!

 

[Apex Capital]

Quote from TWMPMM:

Speculation requires liquidity.

Exactly.

Right now, you are lucky to find 50-100 contracts trade in the Chicago or New York Hdd Futures with an open interest of 500 contracts.

http://www.cme.com/trading/dta/del/product_list.html?ProductType=wea