Having worked on the COMEX in college, WeatherBill takes me back to those days of hedging risk by buying futures and options of commodities. In the case of WeatherBill, the trading is of weather contracts. It's a great idea. WeatherBill is a way for businesses to hedge their risk against weather. In many ways, it's really a form of insurance against adverse weather. If you're a golf course operator, and want to get paid $3,000 per rainy day (defined by level of precipitation), you could enter that $3k amount in, and WeatherBill will calculate how much that insurance contract costs. Alternatively, if you're a coffee shop owner, you might want to buy weather contracts or insurance against sunny days, because those are the days that draw fewer customers. In the most simple terms, these contracts are then sold to hedge funds who essentially buy the risk away from WeatherBill. WeatherBill plays a bit of an arbitrage game between its clients - those buying the insurance contracts - and the hedge funds. In this video, WeatherBill CEO David Friedberg talks a bit about his new business, which just went live in mid-January.
Josiah Motley