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Options Investing: Banking on the weather

Posted June 4, 2008

“The commodities to keep an eye on are the ones you are already reading about. The corn, sugar, and wheat industries are up against a wall.” - Andrew Snyder

By Andrew Snyder

Ketchikan, AK (TFN)– Few investors would ever use a weatherman for their financial advice. After all, if a guy cannot accurately predict the weather 50% of the time, what would make you think he can pick winning stocks? But we are in the height of summer and the tourism season, so it may be time to have a chat with the local weatherman.

For options investors, short-term weather phenomenon can spell big profits. With oil prices constantly threatening to head for the stratosphere, it is nearly impossible not to turn to the energy industry for some weather-induced speculation. All it takes is one good Gulf-region storm, and a handful of companies will see their share price soar. We all remember the feeding frenzy after Katrina ravaged the South.

The energy industry is a great option, but that is the direction everybody heads when the tropics start firing storms our way. There are lots of other profitable options. This year, smart investors will keep an eye on the food-production industry.

Paying for our waistline

Food prices are already sky high. All of us eat, and all of us have felt the pinch. A meal that cost $20 to prepare last year costs $35 to make this year. If a hurricane even threatens to disrupt the nation’s food supply, you can bet those figures will increase exponentially. For folks with a keen eye for profits, that can lead to some very lucrative investing.

The commodities to keep an eye on are the ones you are already reading about. The corn, sugar, and wheat industries are up against a wall. Global demand is calling for huge amounts of food, but they can only produce so much. The only way to slow demand is to raise prices.

Of course, it is not as easy as buying some wheat and storing it in your kitchen. Your wife would kill you and you would only make a few bucks any way. The real money will be made by using options investments to take advantage of the short-term leaps and plunges caused by the summer’s intense weather phenomenon.

I could list off a dozen or so possible investments, but depending on what Mother Nature has in store for the summer, just a select few will make you any money. I would rather just tell you about one investment that has a shot at real profits no matter where the nasty weather strikes. We know it will take its toll somewhere.

Shipping in the cash

The most important fact to remember about a quickly expanding global economy is that nearly all major commodities have to be shipped. No country can produce everything it needs. That is why companies like DryShips (DRYS:NASDAQ) are a prime options investment opportunity.

When trouble strikes, the supply chain will be disrupted. Companies like DryShips that can deliver what the world needs will be in huge demand. As we have seen in the past, it is very good for share price. Take a close look at the company’s September 100 calls (DQRIT.X).

Take a long options position now and give your local weatherman a call. His predictions may just pay off.


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Posted by Andrew Snyder · Filed Under US Stocks and Markets 

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