Snow Futures: Hedging Bets On The Costs Of Winter In only its second year, a market to trade snow futures contracts is thriving. Businesses from airlines to salt providers are using the market as insurance. And the recent storm will likely make the market even more attractive.

Snow Futures: Hedging Bets On The Costs Of Winter

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STEVE INSKEEP, Host:

Here's Niala Boodhoo of the Midwest reporting project Changing Gears.

(SOUNDBITE OF SCRAPING SOUNDS)

NIALA BOODHOO: The old-fashioned way to deal with record snow fall usually involved shovels, plows or snowblowers. But former Merrill Lynch trader Jeff Hodgson had another idea.

JEFF HODGSON: Wow. This is a storm that I didn't foresee coming. And I just lost a lot of money on my business, or maybe I could've made more money.

BOODHOO: So here's how it works: the average snowfall for winter in Chicago is around 37 inches. So the contracts are like insurance, paying out a set amount of money for every inch over or under, depending on what kind of contract you take out.

TIM ANDRIESEN: Everybody kind of says, well, you can control everything but the weather.

BOODHOO: That's the Chicago Mercantile's Tim Andriesen.

ANDRIESEN: Well, we can't control the weather, but we can help you mitigate the risk of the weather on your business.

BOODHOO: These snow contracts are based on official airport snowfall tallies at Chicago's O'Hare, Minneapolis/St. Paul, Detroit and Boston, as well as New York's LaGuardia and in Central Park. Andriesen says contract holders range from road salt manufacturers and property managers to snow removal contractors and airlines.

ANDRIESEN: Our products would allow people to hedge against that extra cost of having to deal with the weather.

BOODHOO: For NPR News, I'm Niala Boodhoo in Chicago.

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