Chicago O’Hare records a daily high of 100°F or above before Sep 30, 2026
Extreme heat can push power demand above hedged volumes. Utilities and large power buyers then procure incremental electricity at elevated prices. A fixed payout on the O’Hare station print sets that exposure as a known amount, settled in cash within five business days of determination.
- Season high
- 96.0°F on JUL 14
- Observation
- Execution → Sep 30, 2026
Term sheet
Terms for discussion. Not an offer, solicitation, or recommendation to enter into any transaction. Size, availability, and pricing are agreed bilaterally with eligible contract participants.
- Structure
- Binary event contract.
- Trigger event
- The official daily maximum temperature at Chicago O’Hare International Airport (KORD) reaches 100°F or above on any calendar day within the observation period.
- Observation period
- Execution date through September 30, 2026.
- Reference source
- National Weather Service daily climate reports for Chicago O’Hare International Airport (KORD).
- Determination
- The official daily maximum for the calendar day as published in the NWS daily climate report. Published reports are corrected from time to time; the documentation names which publication governs and fixes the treatment of corrections at execution.
- Payout
- Fixed amount agreed at execution, payable upon the first qualifying day. If no day qualifies within the observation period, the contract expires at zero.
- Premium
- Paid in full at execution.
- Settlement
- Cash settlement within five business days of determination.
- Size and tenor
- Notional and tenor negotiated bilaterally at execution.
- Customization
- Alternative thresholds, stations, and cumulative structures (for example, a count of days at or above 95°F) are available and priced accordingly.
- Documentation
- Bilateral contract specifying the station, threshold, data sources, determination process, and settlement timeline in full, including the fallback where the station is relocated or the report is discontinued.
The economic exposure
You hedge the summer load book to normal weather. Cooling load can push actual demand past hedged volume once the O’Hare print runs into the high nineties, leaving you to cover the shortfall in the day-ahead and real-time markets, on the afternoons when scarcity pricing sets the summer’s highs. Volume error and the price spike can miss each other; on the days they coincide, a handful of sessions can carry most of a season’s variance. Large offtakers see the mirror image, curtailing load or paying demand charges to stay inside contracted capacity.
The conventional instrument is a cooling-degree-day swap, which settles on a cumulative index of degree days over the contract month or season. A season can close near normal in aggregate and still contain the two afternoons that produced the whole loss. Power options hedge the price of electricity and leave the weather-driven quantity error in the load book. A contract keyed to the station print pays on the physical driver. Three quantities remain distinct: the temperature recorded at KORD, the load and price impact on your book, and a payout fixed in advance. Sizing against the load book is a judgment you make at execution.
Why this structure
Use this where the exposure is threshold-shaped. Determination reads one published number from one station. You skip the loss-adjustment process, prove nothing about your own book, and fix the cost at execution. A smoother loss profile, a warm summer instead of an extreme afternoon, still belongs on a degree-day swap, and you can hold both.
What it does not do. A summer delivering five qualifying days settles the same as one delivering a single day. The contract covers the occurrence of extreme heat; persistence is a separate exposure. A cumulative day-count structure fits persistence.
Other exposure areas
Discrete structures similar exposures the same way.
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