Forecast-the-Forecast (FtF) 

Highlighting Opportunity

Forecast-the-Forecast (FtF) predicts the direction and magnitude of the swing in the next deterministic forecast run of the GFS and ECMWF global models.

The price of a weather-sensitive commodity like energy can be expected to move, at least to some degree with the best forecast available to the market at large. Thus, an expected change in the forecast can help a speculator to decide whether to buy or sell, by indicating the likely movement of the market with the release of the next model issue.

For example, the 00 UTC initialization of the GFS deterministic model might be issued by around 0430-0500 UTC. FtF is configured to predict the likely changes in forecast temperatures in this initialization before the model run is complete, roughly 0400 UTC or sooner.

The information does not just help speculators – it can also help a trader attempting to control risk in a volatile market. A reliable indication of the likely volatility of future forecasts can be helpful to decide whether an option on a weather-sensitive underlier is appropriately priced; the width of the model-trend ePD provides such an indication.

FtF enables you to quantify the short term risk associated with taking a position based on the current or next forecast issue.