US Monthly Weather Heating Degree Day (HDD)

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This product is geared to how much below 65 degrees Fahrenheit the temperature averages in a given city in a given month. It provides a way to:

• Protect revenues during times of depressed demand or excessive costs in months when consumers may use heat
• Accept the risk of unfavorable or atypical weather in exchange for possible profit

Learn How to Electronically Submit CME Group Weather Blocks at www.cmegroup.com/pivot

You can trade monthly U.S. Monthly HDD futures on the following cities:

Things to know:

• You can trade contracts on 7 months: Oct, Nov, Dec, Jan, Feb, Mar, Apr
• Traded electronically on the CME Globex platform
  • Accessible around the clock, around the world
  • Complete price transparency and anonymity
• Each city has a distinct ticker code and trading symbol
• Block trading available
• CME Clearing clears and settles all trades and guarantees counterparty creditworthiness
  • Settlement is 2 business days following expiration
  • Cash-settled

About Heating Degree Days (HDDs)

Degree days are measures of temperature deviations from 65 degrees Fahrenheit or 18 degrees Celsius. The United States measures HDDs in terms of the Fahrenheit temperature scale while Europe, Canada and Japan use the Celsius temperature scale.

A Heating Degree Day (HDD) value is a measure of how cold a day is in terms of how many degrees that day’s average temperature is below 65 degrees Fahrenheit or 18 degrees Celsius. The energy industry uses the Heating Degree Day Index to gauge how much energy customers are likely to use for heat based on how cold it is in terms of HDDs for given months or a season.

For example, an average daily temperature of 40 degrees would generate an HDD value of 25 (65 - 40 = 25). If the temperature exceeded 65 degrees, the value of the HDD would be zero.

A monthly or seasonal strip HDD value is simply the sum of each daily HDD value recorded during a given month or seasonal strip.

For example, if there were 7 HDD daily values recorded in November in Chicago, the November 2005 HDD index would be the sum of the 7 daily values. Thus, if the HDD values were 25, 15, 20, 25, 18, 22 and 23 the November HDD index value would be 148.

The value of an HDD futures contract is determined by multiplying the monthly or seasonal strip HDD value by $20. Using the example above, a November Weather contract would settle at $2,960 ($20 x 148 = $2,960).

The same rules apply if calculating temperatures in Celsius instead. The calculations would simply use different numbers.

For example, if temperatures in November in Paris had HDD values of 13, 6, 10, 13, 9, 11and 12 the November HDD index value would be 74. This would be multiplied by 20 British pounds instead of U.S. dollars, based on contract specifications. Thus, the contract value would be 74 x 20 British pounds or 1,480 pounds.