Weather Prediction Markets on Kalshi: A Beginner's Guide

You check the weather forecast every day. What if you could profit from it?

Kalshi has built a robust category of weather prediction markets. Temperature ranges. Hurricane landfalls. Snowfall totals. Seasonal forecasts.

These markets are unique. The edge isn’t political knowledge or sports expertise. It’s understanding meteorology better than other traders.

Let me show you how weather markets work and how to trade them.

How Weather Markets Work

Weather markets on Kalshi are structured as binary contracts. The question is simple: Will X happen?

Examples:

• “Will NYC temperature exceed 85F on July 15?” (Yes/No)
• “Will a Category 3+ hurricane make US landfall this season?” (Yes/No)
• “Will Chicago receive more than 4 inches of snow this weekend?” (Yes/No)

You buy Yes or No shares. If your prediction is correct, shares pay out $1. If wrong, they’re worthless.

Prices reflect market probability. If Yes trades at 65 cents, the market thinks there’s a 65% chance of the event happening.

Types of Weather Markets

Daily temperature markets

For major cities, Kalshi offers markets on daily high temperatures. Will NYC hit 80F today? Will LA exceed 100F?

These resolve daily based on official weather station data. Fast resolution means quick capital turnover.

Weekly weather markets

Will total precipitation exceed X inches this week? Will there be any snowfall? Will temperatures stay above/below thresholds?

Longer timeframe. More uncertainty. Often more edge if you understand weather patterns.

Seasonal markets

Hurricane season activity. Hottest month ever for a region. Drought conditions.

These can take months to resolve. Less liquidity but potentially bigger edges for those who understand climate patterns.

Event-specific markets

Major weather events create markets. Approaching hurricanes, bomb cyclones, heat waves. These are high-attention, high-liquidity opportunities.

Where Weather Predictions Come From

To trade weather markets, you need weather forecasts. Here’s where to get them:

The National Weather Service (NWS)

Official US government forecasts. Free. Reliable. The baseline everyone uses.

For temperature and precipitation, NWS gives percentage chances. These are your starting point.

European Centre for Medium-Range Weather Forecasts (ECMWF)

Often considered the gold standard for forecast accuracy. The “Euro model” frequently outperforms American models.

Access costs money for full data, but forecaster discussions reference it.

Private weather services

Weather Underground, AccuWeather, Weather.com. They all run their own models and provide forecasts.

Comparing multiple sources helps identify consensus and disagreement.

Model data directly

For serious traders: GFS, NAM, ECMWF, and other raw model outputs are available. You can interpret the data yourself if you know meteorology.

Finding Edge in Weather Markets

The market prices in publicly available forecasts. To profit, you need one of these edges:

Edge 1: Better models

If you have access to better forecast models (or interpret them better), you can beat market consensus.

Some traders run their own weather models or ensemble methods combining multiple sources. This is advanced but profitable for those who know what they’re doing.

Edge 2: Local knowledge

Microclimates exist. Official weather stations might not capture local conditions.

If you live in a specific neighborhood and understand how temperatures there differ from the airport sensor, you have information others don’t.

Edge 3: Timing

Forecasts update constantly. A 7-day forecast is uncertain. A 2-day forecast is much more reliable.

As the event approaches, uncertainty resolves. If you’re faster at incorporating forecast updates than the market, you have edge.

Edge 4: Extreme events

Markets often misprice tail risks. The chance of a historic heat wave or unprecedented storm might be higher (or lower) than people think.

If you understand extreme value statistics and climate trends, you can identify mispriced low-probability events.

Practical Trading Strategies

Strategy 1: The Forecast Watcher

Simple approach: Watch NWS forecasts. When they update significantly, trade before the market adjusts.

Morning updates often move markets. Evening updates for the next day can create opportunities.

Speed matters. Set up alerts for forecast changes in markets you’re watching.

Strategy 2: The Model Comparison

Compare forecasts from different sources. When they disagree, figure out who’s usually right in that situation.

Example: The GFS model says storm, Euro says no storm. Historically, Euro is more accurate for this type of setup. Trade accordingly.

This requires understanding model biases and strengths.

Strategy 3: The Seasonal Edge

Longer-term markets are less efficient. Most traders focus on short-term.

If you understand climate patterns, El Nino/La Nina effects, and seasonal trends, you can find edges in seasonal markets.

Example: A strong La Nina pattern suggests certain regional weather trends. If markets aren’t pricing this in, trade it.

Strategy 4: The Event Trader

When major weather events approach (hurricanes, heat waves, winter storms), markets get active.

The early forecasts have huge uncertainty. As the event approaches, uncertainty narrows. Position early if you have conviction, or wait for clarity and trade smaller edges with more confidence.

Hurricane markets are particularly interesting because track forecasts have known error patterns.

Hurricane Markets: A Special Category

Hurricane markets deserve their own section because they’re some of the most tradeable weather events.

Seasonal hurricane markets

Will there be more than X named storms? Will a major hurricane hit Florida? These open months before hurricane season and resolve in November.

Edge comes from understanding Atlantic basin conditions. Sea surface temperatures, wind shear patterns, and African wave activity all matter.

Individual storm markets

When a tropical system forms, markets open on landfall location, intensity, and timing.

Hurricane track forecasts improve dramatically as storms approach. A 5-day forecast has huge uncertainty. A 2-day forecast is much tighter.

Trading the cone

The NHC forecast cone shows possible tracks. Markets price in this uncertainty. As new advisories narrow the cone, prices adjust.

Getting ahead of advisory updates is a real edge. If you understand how hurricane models are trending between official updates, you can trade before the market adjusts.

Temperature Market Tactics

Daily temperature markets are fast-moving and liquid.

Watch the forecast trend

If yesterday’s forecast said 82F and today’s says 78F, and the market for “over 80F” is still at 50 cents, there’s edge.

Forecasts change. Markets don’t always keep up.

Understand verification points

Kalshi uses specific weather stations for resolution. The airport might be hotter than downtown. The station on the coast might be cooler than inland.

Know which station your market uses. That’s what matters, not the “general” city temperature.

Morning vs evening

Temperature forecasts for the current day are most accurate in the morning when models have processed overnight data. Late-night forecasts for tomorrow have more uncertainty.

Trade timing matters.

Risk Management for Weather Markets

Weather markets have unique risks:

Resolution ambiguity

What if the weather station has missing data? What if there’s a dispute about readings? Know the resolution rules before you trade.

Correlated positions

If you bet Yes on high temperatures in five different cities, you don’t have five independent bets. A heat wave hits all of them together.

Think about correlation when sizing positions.

Model failures

Sometimes forecasts are just wrong. Hurricanes make unexpected turns. Cold fronts stall. Temperature forecasts miss by 10 degrees.

No model is perfect. Size positions assuming the forecast might be completely wrong.

Getting Started

Week 1: Observe

Pick a city. Watch the temperature market for a week. Compare market prices to forecasts. See how prices move as resolution approaches.

Don’t trade yet. Just learn the rhythm.

Week 2: Small trades

Make a few small trades ($10-20). Test your ability to incorporate forecast information.

Track your results. Were you ahead of the market? Behind it?

Month 2+: Scale what works

If you’re finding edge, increase size. If you’re not, analyze why and adjust.

Weather markets reward consistency over time, not one lucky trade.

The Bottom Line

Weather prediction markets are unique in the prediction market landscape. The edge isn’t about politics or sports knowledge. It’s about understanding meteorology.

If you’re a weather geek, you finally have a way to profit from your interest. If you’re just a trader looking for uncorrelated returns, weather markets offer diversification from political and sports betting.

The markets are still relatively new. Liquidity is growing but not yet dominated by sophisticated players. There’s room for people with genuine weather knowledge to profit.

You’ve been checking the weather forecast for free your whole life. Maybe it’s time to start getting paid for it.