CHICAGO – In a bid to help lawn care operators and other green industry professionals take the financial hit out of rainy days and delays, CME Group has begun listing and trading rainfall futures, options on futures and binary options.
The monthly and seasonal contracts will be based on the CME Rainfall Index and will be available March through October. These contracts will be listed with, and subject to, the rules and regulations of CME.
“The new precipitation contracts are not only a viable hedging tool for large agricultural market participants, but are also applicable to smaller industries such as landscape contractors, golf courses and even pest control companies,” says Jeff Hodgson, president of the Chicago Weather Brokerage.
In 2009, Lawn & Landscape’s parent company, GIE Media, entered into an exclusive marketing agreement with Chicago Weather Brokerage to help them bring financial support to the snow management industry.
“Last year, we helped them launch snowfall options for snow contractors to eliminate the fluctuations in profit due to the unpredictability of Mother Nature,” says Kevin Gilbride, publisher of Lawn & Landscape. “Our sister markets in the green industry – specifically agriculture – have had these tools since the 1800s.”
The rainfall contract locations include Chicago O'Hare International Airport, Dallas-Fort Worth International Airport, Des MoinesInternational Airport, Detroit Metro Airport, Jacksonville International Airport, Los Angeles Downtown USC Campus, New York LaGuardia Airport, Portland International Airport and Raleigh/Durham International Airport.
The futures and options on futures contracts enable buyers 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.
To view a webinar on how the process works in the snow removal market, click here.