What Are Weather Prediction Markets?
Weather prediction markets let you bet on measurable weather outcomes. On Kalshi, the most popular markets are daily high temperature predictions for major cities.
It works like this: You buy a contract that pays $1 if a condition is true (e.g., "NYC high temp above 45°F"). If you're right, you profit. If you're wrong, you lose your stake.
Simple concept. Surprisingly deep strategy.
Why Weather Markets?
Weather markets have unique properties that make them attractive:
Clear resolution: The thermometer doesn't lie. No subjective judgment, no disputed outcomes.
High frequency: New markets every day. Lots of opportunities to find edge.
Accessible data: Weather forecasts are public. You're competing on interpretation, not information access.
Low correlation: Weather in NYC doesn't care about stock prices. True diversification.
Getting Started on Kalshi
Step 1: Create an Account
Head to kalshi.com and sign up. You'll need:
- Valid ID for verification
- US residency (Kalshi is US-only)
- Bank account or debit card for deposits
Verification typically takes 1-2 days.
Step 2: Fund Your Account
Start small. Seriously. Deposit $50-100 to learn the mechanics before scaling up.
Kalshi accepts:
- Bank transfers (ACH) - free, takes 3-5 days
- Debit cards - instant, small fee
- Wire transfers - for larger amounts
Step 3: Find Weather Markets
Navigate to Markets → Weather → Temperature
You'll see markets organized by:
- City (NYC, Chicago, Miami, Austin)
- Date (today, tomorrow, etc.)
- Strike price (temperature threshold)
Understanding the Interface
Market Structure
Each temperature market has multiple "strike" prices. For example, NYC January 10 might have:
| Contract | Current Price |
|---|---|
| Above 30°F | 95¢ |
| Above 35°F | 88¢ |
| Above 40°F | 72¢ |
| Above 45°F | 51¢ |
| Above 50°F | 28¢ |
| Above 55°F | 12¢ |
The price represents the market's implied probability. A 72¢ price means the market thinks there's a 72% chance the high exceeds 40°F.
Buying vs. Selling
Buying (Yes): You think the probability is higher than the market price. You profit if the condition occurs.
Selling (No): You think the probability is lower than the market price. You profit if the condition doesn't occur.
Example:
- Market: "Above 45°F" at 60¢
- You think there's an 80% chance of exceeding 45°F
- Action: Buy at 60¢
- If right: Receive $1, profit 40¢
- If wrong: Lose 60¢
Your First Trade: A Walkthrough
Let's walk through an actual trade step by step.
Scenario
It's January 10, 8 AM. You're looking at Chicago high temperature markets for today.
Current conditions: 28°F, cloudy, light snow Forecast: Weather.com says high of 34°F Market: "Above 32°F" priced at 50¢
Analysis
-
Check multiple forecasts:
- Weather.com: 34°F
- National Weather Service: 35°F
- Weather Underground: 33°F
-
Assess uncertainty: All forecasts agree on low 30s. Relatively high confidence.
-
Calculate your probability: Based on forecasts, you estimate 75% chance of exceeding 32°F.
-
Determine edge: 75% - 50% = 25% edge
-
Decide position size: With a 25% edge, this is a strong signal. But you're new, so keep it small.
Execution
- Click on "Above 32°F" market
- Select "Buy" (you're betting Yes)
- Enter quantity: 10 contracts ($5 at risk)
- Review: You'll pay 10 if Above 32°F
- Submit order
Result
Let's say Chicago hits 35°F. Your contracts pay out:
- Payout: 10 × 10
- Cost: 10 × 5
- Profit: $5 (100% return on risk)
Common Beginner Mistakes
Mistake 1: Trusting a Single Source
Wrong: "Weather.com says 45°F, so I'll buy Above 44°F at 95¢"
Right: Check multiple models. Understand uncertainty. A point forecast doesn't tell you the distribution.
Mistake 2: Ignoring Time Value
Weather forecasts improve as the day approaches. A market priced at 50¢ at midnight might be 90¢ or 10¢ by noon as models converge.
Implication: Early trades carry more risk but potentially more reward.
Mistake 3: Overtrading
You don't need to trade every market. Most of the time, prices are efficient. Wait for genuine edge.
Rule: If you can't articulate why you have edge, you probably don't.
Mistake 4: Ignoring Transaction Costs
Kalshi charges fees on trades. Factor this into your expected value:
- Taker fee: 7¢ per contract
- Maker fee: 3¢ per contract (if providing liquidity)
A "5% edge" might be break-even after fees.
Mistake 5: Poor Position Sizing
Even with edge, you'll have losing streaks. Risking too much on any single trade can blow up your account.
Kelly Criterion: Risk (edge / odds) of your bankroll. For beginners, use quarter or half Kelly.
Building Your Edge
Here's how to develop actual skill in weather markets:
1. Learn the Models
Understand what HRRR, GFS, and ECMWF are. Learn their update schedules. Know their strengths and weaknesses.
Resources:
- Weather.gov Model Guidance
- Tropical Tidbits (free model viewer)
- Pivotal Weather (free, excellent interface)
2. Track Model Performance
Create a spreadsheet. Track what each model predicted vs. actual temperature. Over time, you'll learn which models work best for which cities.
3. Understand Local Effects
Generic forecasts miss local nuances:
- Urban heat island effects
- Lake effects (Chicago!)
- Coastal influences (Miami)
- Elevation (not relevant for these cities, but matters elsewhere)
4. Time Your Entries
Model updates happen at specific times:
- HRRR: Every hour
- GFS: 00Z, 06Z, 12Z, 18Z (roughly 7pm, 1am, 7am, 1pm ET)
- ECMWF: 00Z, 12Z
Markets often lag model updates. Being among the first to incorporate new information creates edge.
5. Specialize
You can't be an expert in everything. Pick one city and go deep. Learn its microclimates, its model biases, its seasonal patterns.
Risk Management for Beginners
Start Small
Maximum 1-2% of your bankroll per trade while learning.
Track Everything
Log every trade: entry, exit, reasoning, result. Review weekly to identify patterns in your mistakes.
Set Limits
Decide in advance: "I'll stop trading for the day if I lose Y."
Emotional trading is losing trading.
Accept Losses
Even with edge, you'll lose ~40% of trades. That's math, not failure. Focus on long-term expected value.
Tools We Recommend
Free:
- Tropical Tidbits - Weather model viewer
- Weather.gov - Official NWS forecasts
- NOAA METAR data - Real-time airport observations
Paid (when you're ready to scale):
- ECMWF direct access
- Professional weather APIs
- Arctic Odds dashboard 😉
Next Steps
- Open a Kalshi account and deposit a small amount
- Paper trade first - track hypothetical trades without risking money
- Make 10 small trades - get comfortable with the mechanics
- Review your results - identify what's working
- Read our methodology - understand our approach to ensemble forecasting
The Bottom Line
Weather markets are a legitimate arena for skill expression. The data is public, the math is straightforward, and the markets are efficient enough to be competitive but inefficient enough to offer edge.
But don't expect easy money. The traders you're competing against include:
- Quant funds with sophisticated models
- Weather professionals moonlighting for extra income
- Automated systems trading 24/7
Your edge will come from discipline, specialization, and continuous improvement.
Welcome to Arctic Odds. Let's hunt some mispricings. 🐻❄️
Ready to go deeper? Read our methodology to understand how we generate signals.