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Interpreting Heating Degree Day Futures Quotes and Contract Months

Article Quant Q&A · Author: user7911
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Summary

The document examines an apparent July quote for Dallas heating degree day futures, a contract that seems inconsistent with the location’s usual summer weather. Its response questions whether the quoted instrument was actually trading and suggests the figure may be bad data rather than a meaningful HDD price. It also distinguishes the quote from a possible cooling degree day measure, noting that the expected scale would differ substantially.

The response uses CME contract listings as its main check: it says Dallas HDD contracts are listed for the colder months, with October and April also included, and that the cited June contract code does not appear in the official product code sheet. The discussion is brief and does not independently verify the quote or provide a general pricing formula. Its practical lesson is to confirm the instrument, contract month, and exchange listing before interpreting a displayed weather futures price.

Key ideas

  • A displayed weather futures quote may be erroneous or refer to an instrument other than the one assumed.
  • Check exchange listings and contract codes before interpreting a quote.
  • Heating degree day contract months are seasonal and may exclude summer months.
  • Cooling degree day values and heating degree day values have different expected scales.

Tags

FuturesCommoditiesStatistics
Full text
# What do "heating degree day" prices actually measure?


# What do "heating degree day" prices actually measure?












The futures for Dallas Heating Degree days for July 2022 are trading around 6.83 But Dallas is hot in July and does not typically get any heating degree days So, what does the 6.83 for July 2022 correspond to?

## Answer by AKdemy (score 2)

https://quant.stackexchange.com/a/70874

Are you sure these futures are trading? There is no data on BBG - or the CME.

I have no experience with these products, but I am almost certain that there are no quotes (and hence no trading) for July weather futures for Dallas at the CME.

I don't think it's CDD either (should be a lot higher - around 480 according to the second link in the question, which seems reasonable) but just bad data. According to the CME, the contract months for HDD are Nov, Dec, Jan, Feb, Mar plus Oct and Apr only.

CME's official WEATHER Products code sheet also shows no such thing as a H5 N22 (Dallas June 22 future) as your link claims.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.