The Chicago Mercantile Exchange is selling snow--snow futures that is. Similar to their temperature and frost futures, snow futures will allow local municipalities to hedge their risk from major snow events.
Here's how it will work.
Snowfall futures and options are geared to a snowfall index focusing initially on Boston and New York. The index will change based on official daily snowfall totals.
Investors can buy and sell contracts trading on a monthly basis from October through April. A trader makes money on a contract when the index rises after it is purchased and loses money when it falls.
Why, you ask?
From the standpoint of municipalities or companies that are concerned with excessive snowfall and whether they will have shipment of goods, there's now the opportunity to hedge your removal costs or transportation delays or other weather-related exposure," [Brian O'Hearne, managing director of the environment and commodities markets for Swiss Reinsurance Co. and president of the Weather Risk Management Association] said. "CME's had a very good idea on the weather."