Rainfall Future Contracts Essay

Words: 1163
Pages: 5

Rainfall Future Contracts
Throughout the year, there are different seasons that could have several impacts on many industries. To be precise, the elements of weather can actually impact a company and how well they do during the different seasons of the year. Rainfall is a part of our life in some areas, almost daily, and others randomly, affecting every business in some sort of way. Although we can’t predict or control the weather, there is a way companies can hedge any losses that weather could potentially contribute to. Using a Rainfall Future Contract does this. These help companies manage risk and access profit opportunity. Chicago Mercantile Exchange happens to be the largest trader of commodities and futures in the world. They
…show more content…
Hodgson himself does many speeches and Web-based seminars to help those unfamiliar with these types of securities. The second step is to show the potential clients how using these securities could potentially affect their bottom line. This requires a vast knowledge of each of the industries as well as the rainfall futures market so that they feel that they are doing something that would actually help them. The third step is, once the client decides to use the rainfall contracts, to execute the trade with the Chicago Weather Brokerage. The second way that a client could use rainfall futures is for the purpose of investing to make a profit. Instead of hedging the risk for the sake of protecting the livelihood of a company, a potential investor could invest or gamble in the same way someone gambles on a sports game. An investor would still have to do a lot of research before making the investment and would have a plethora of available information through the historical rainfall records that are readily available. Investing in rainfall futures could also hedge your current investments as well. Say you are investing in companies that could greatly be affected by the fluctuation of rainfall, purchasing a rainfall future could help you insure those securities. This however, was not the original purpose of the creation of this market. The market for rainfall futures is still a