I'm no weatherman, but I sure do love to talk about the weather. We previously touched upon what areas to focus on when a hurricane comes to town, which had a philosophy rooted in actual damage done to the area that was affected by the storm (i.e.- building and infrastructure repairs, etc.). This makes sense: if a hurricane does one million dollars in damage, there will need to be one million dollars in done in repairs to fix said damage. However, that isn't always the case. In many instances, people act irrationally when bad weather comes to town--generally caused by a fear of what they cannot control (with a little bit of hysteria sprinkled in by the local news broadcast). For those of you in the snowy regions of the world (or the Northeastern United States, like I am) you know exactly what I'm talking about. When snow is in the forecast, everyone loses their senses: shovels and salt disappear from the shelves, bottles of water and gallons of milk become as coveted as bars of silver and gold, and the only person on the road is your crazy neighbor who has an ATV.
Not only are people prepping themselves for their eventual battle with the snow outside, but they are also prepping against the weather's effects inside. In the days surrounding a huge snowstorm, it's not unusual for the temperature to drop in the low teens, single digits, or even go negative for several days--making life inside only marginally better than being stuck outside. So, any logical person would do what to make their indoor hideaway from the snow more comfortable? Turn the heat on.
Now, while you would think that people would look at the forecast, acknowledge that the storm will pass in a day or two, and just start making hot chocolate and call it a day. However, like we mentioned earlier, people--for the most part--are absolutely irrational. Just like they rush to the store to get provisions, they rush to the telephone to make a call to their gas company for an "emergency delivery." Why? Because, in some perverted sense of disaster, most people will think that if they don't fill their half tank of oil today, they'll end up freezing to death.
Thankfully, among all of the chaos of fighting the gas company to get a snap delivery, there's still something to gain--massively gain. If you've never traded commodities, no need to worry! Here at SnoQap we absolutely love ETFs cause, well...they're a heck of a lot easier to trade! There are plenty of ETFs that are trade-able, but the two most straightforward (and fun) are UGAZ and DGAZ, three times leveraged long natural gas and three times leveraged inverse natural gas. These track a basket of measures of the price of natural gas and offer three times greater change in the value--perfect for absolute disaster!
So, the real question of the day: how do you trade this? And, further, how would you know it's a good idea? Well, the first thing is to acknowledge the fact that,while it's "always winter somewhere" (AKA opposite seasons in the hemispheres) it's coldest during the transition to Northern Hemisphere's winter: September to December, as the Northern Hemisphere, has as greater portion of the global landmass, and the coldest temperatures (see below).
Seeing as though the winters are the worst in the Northern Hemisphere, can you guess who is the largest consumer of heating fuel in the hemisphere? Yup, it's the good ol' U.S. of A. Even further, we can see that the Northeast has the harshest winter temperatures, depicted in the following graph:
On average, in the winter months, you're seeing temperatures of freezing (32 degrees Fahrenheit) for much of the time--sucks, I know. As a consequence, the Northeast has the highest collective consumption of heating fuel in the USA--what does that mean? Befriend a local weatherperson. Who cares if they don't know what they're doing, all you care about is if they're scaring the hell out of everyone with their predictions of the next "Snopocolyspe."
So the next time that the news is calling for a crazy storm: grab your shovels, put your fuzzy slippers on your feet, and log into your brokerage account 'cause Wall Street closes for no snowman, and you have a white-hot killing to make.