Teleconnections
Last updated
Last updated
Weather changes rapidly. We perceive it to be a relatively local event, but in reality we are all linked together by our planet's weather patterns.
There are many factors that influence our weather patterns. Some of the most important are ocean water temperatures, ocean currents, and the many other factors that may trap warm air over the earth's surface for prolonged periods of time. Although these factors and their effects are difficult to model, they nevertheless leave powerful signatures. Climatologists often refer to these as "teleconnections".
For example, one of these is called the North Atlantic Oscillation, or (NAO). Simply put, the NAO is a pattern based on air pressure. When in its positive mode, there is very high surface pressure over the Atlantic Ocean between Bermuda and Spain, and very low pressure over Greenland. During it's negative mode, the pressure over Bermuda and Spain is weaker, but the high pressure becomes located much closer to Europe.
The resulting temperature anomalies over the US tend to be as follows:
These teleconnection induced anomalies tend to persist for days, if not weeks. Therefore, a skillful weather trader can place very targeted trades based on these teleconnections alone.
For example, the following is the NAO reading from NOAA for the summer season 2024 (as of July 22, 2024):
Note that in mid-June, the NAO went into its positive phase and stayed positive for the next month through late July. A positive phase for the NAO would generally mean that the eastern US would be warmer than normal.
These are the information panels showing the synthetic underlyings of some eastern US cities for the same time period:
From these information panels, it is clear the effect the NAO has on eastern US temperatures while in its positive phase as the underlyings increased dramatically.
The WeatherMage platform allows traders to trade among a large population of cities across the globe, making it very easy to construct weather plays based on teleconnection themes. It also allows the trader to potentially hedge exposures with cities from across the globe.
A good introduction to teleconnections can be found here:
