Water futures set to join likes of gold and oil and trade on Wall Street for first time ever
- Future contracts tied to the spot price of
waterare set to trade on Wall Streetfor the first time ever this week.
- The CME Group is launching the contracts, linked to the $1.1 billion California spot water market.
- The water contracts will allow farmers and investors alike to hedge against, or bet on the potential for water scarcity.
- One high profile investor that may be eyeing an investment in the water contracts:
Michael Burryof "The Big Short."
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The contracts will allow investors and farmers alike to bet on the future price of water. The contracts are tied to the $1.1 billion California spot water market.
While water will officially join the likes of gold, oil, and other
The water contracts are tied to the Nasdaq Veles California Water Index which was launched two years ago. The index is driven by the volume-weighted average of the transaction prices in California's five largest and most actively traded water
Contracts will each represent 10 acre-feet of water, equal to about 3.26 million gallons.
One high-profile investor potentially looking to capitalize on the newly launched water future contracts is Michael Burry of "The Big Short."
Burry highlighted water as one of his top investment ideas following the great financial crisis of 2008, as he sees demand for the life-sustaining natural resource to continue climbing as supply falls due to population growth and climate change.
But farmers will likely utilize the water contracts more than investors, as they look to hedge out their input costs amid an increasingly uncertain climate environment.
The CME Group initially announced the launch of water futures back in September.
"With nearly two-thirds of the world's population expected to face water shortages by 2025, water scarcity presents a growing risk for businesses and communities around the world, and particularly for the $1.1 billion California water market," said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products.
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