Weather buckets: the missing range can ruin the trade

A row of cheap temperature contracts looks tempting. Add up the prices and the total seems small. Before calling it a coverage trade, look for the range you forgot.

Weather outcomes divide a measurement into buckets. The exact boundaries matter: 20 to 21 degrees is different from 20 degrees or below. The upper and lower tails matter too.

Draw the complete range

Imagine four mutually exclusive, exhaustive outcomes with executable asks totaling 96 cents. Buying one of each could create a dollar of normal settlement value before costs. Leave out the fourth outcome and you have a weather view, not complete coverage.

That example is arithmetic, not a statement about a current market. Real books may not offer all four legs at the same time or in the same size.

Read the measurement rule

Which station? Which local day? Which unit? Is the result a recorded maximum or a forecast? How is rounding handled? Those details can move an observation from one bucket to another.

Write the mapping before you place anything. Then check that each leg refers to the same measurement and date. Different cities or adjacent dates cannot complete one another.

Finally, track partial fills. Owning three buckets while waiting for the fourth can create a surprisingly large exposure to a narrow temperature band. The range diagram is simple. Completing the range is the trade.

Further reading: Prices and order books · Resolution rules · Current fees.

Explore the markets: Open Polymarket (referral link).