Make Money with Hurricane Options (Hurricane Risk Landfall Options)

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hurricane

Countries around the world experience disastrous weather occurrences such as hurricanes, typhoons, and cyclones.  According to NASA, hurricanes are large, swirling storms that can severely damage infrastructures, houses, and trees that are formed over warm ocean waters and clump into a spiral-shaped cloud. Over the past decade, as global warming increases, so has the frequency and voracity of these storms.  

Hurricanes mostly happen in the Pacific, Atlantic, and Indian Oceans, with nearby countries taking the bulk of the hit. Since there are clear cycles and time periods when hurricanes hit and these can be devastating to businesses and communities, it is essential to have insurance to protect your assets.  

Purpose of Hurricane Risk Landfall Option (HuRLO)

For areas or countries prone to hurricanes, you can have a hurricane risk in the financial market. If you purchase an HuRLO, and your area got affected by the hurricane, you‘ll receive a settlement amount from it. HuRLOs are fully self-funded and it does not require taxpayer subsidies. By purchasing HuRLOs, it’ll support those that are vulnerable like small and medium scale enterprises, in case a hurricane arrives. 

The purpose of HuRLOs is to provide a cost-efficient way for people to impede the risks brought by the hurricane. The premiums of HuRLO are based on the associated risk of the area. This is based on the forecast, especially if they will be the first to experience the landfall. 

Now, what happens if you purchase a HuRLO, but thankfully, you did not experience a hurricane? You can also receive money from HuRLO even if you did not experience a hurricane throughout the year. In the financial market, you can use the call option to exercise your right to buy the selected location or area. 

How to Make Money from HuRLO

woman holding money

HuRLO is seen as a limited risk financial product because the risk is detectable thanks to weather forecasts. Thus, if you choose to purchase it, you will not lose an amount that is less than what you paid. Only a few investments and trading platforms have little risk, so this is considered a good one. 

If you decide to try HuRLO to make money, it usually starts in early January. Trading will start during the latter part of the hurricane season and will end on December 15. There are usually two series of HuRLO per year, but you can check the specific dates on the trading platform. Buyers can buy at least 158 HuRLOs combined from the two series, including the “no landfall” option.

The price of HuRLOs is based on the trading judgments of market participants. They can use historical data of hurricanes as a basis for their judgment. This means that there are no fixed prices for the HuRLO since it depends on the people. 

As you purchase HuRLOs, you can also sell them in the secondary market, but short sales are not allowed. The price of the HuRLO will depend on the agreement of the buyer and seller. However, the sales on the secondary market only make the buyer a participant in the trade. It will not add to the number of funds in the risk pool. You can see the picture below to better understand how primary and secondary markets work. 

The hurricane risk landfall option is usually done via the Weather Risk Solutions (WRS) Electronic Trading Platform. You can see this on the EXBOTs board of trade that is contingent on the jurisdiction of the U.S Commodity Futures Trading Commission. 

Banks, insurance companies, hedge funds, large businesses, or those with high net worth are allowed to participate in the trading. The public and retail customers are also allowed to trade, but the market might be different. Trading happens through brokers. So if you wish to try HuRLOs, you might want to find a broker that you can easily communicate with. 

The good thing about HuRLOs is that it is fully transparent. All information is available on the Weather Risk Solutions (WRS) trading platform. The buyers can also base the prices of trade, in case they want to sell it on the secondary market. 

Financial Management

laptop and calculator

Aside from making money from HuRLOs, there are also other ways on how you can minimize financial risks. By investing, you can spread the allocation of your money, and have more chances of growing it to a bigger amount. 

Social Security is a significant investment that you need to religiously accomplish because it will be helpful for your future. Social Security is a benefit that you receive from the government to maintain their economic security. This is the source of our senior citizens’ pensions during retirement. If you received money from HuRLOs, you might want to save a portion of it for your Social Security.  

If you are saving to buy a house, you can start by building your credit. You can do this by utilizing starter credit cards in doing transactions. You can use this if you’ll repair something on your house, in case it got broken due to the hurricane. However, keep in mind that you need to control your expenses and make sure that you’ll pay it on time. 

In buying a house, a good credit score is needed if you aim to apply for financial aid or loans. The banks will be convinced to help you if you have a good credit score because it means that you are a good payer. Also, a good credit score might lower the interest rate that you’ll be paying throughout the loan. However, you should keep yourself debt-free, so the process will be easier and faster. 

Bulletproof your home by investing in HuRLOs, and other financial investments. This will give you someone or something to depend on, in case you are affected by the hurricane. Keep in mind that it is best to start investing when you are still young. By doing so, you can reap greater rewards in the future for yourself and your family.

 

Author
C. James

C. James is the managing editor at Wealth Gang. He has a degree in finance and a passion for creating passive income streams and wealth management.

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