Interactive Brokers Group, an automated global electronic broker, announced that its wholly-owned subsidiary, the CFTC-regulated ForecastEx LLC, started operations on August 1, 2024. Clients of Interactive Brokers from eligible countries can now trade Forecast Contracts on upcoming economic data releases and climate indicators.
Forecast Contracts through ForecastEx facilitate a unique trading approach, allowing investors to hedge against or express conviction on the outcome of key economic and climatic events. The contracts provide a direct method for investors to protect their portfolios from volatility related to economic indicators or climate patterns. They are especially relevant for those invested in cyclical stocks and sectors like industrials, consumer discretionary, and real estate, which are highly sensitive to economic fluctuations.
Thomas Peterffy, Founder and Chairman of Interactive Brokers, stated, “Businesses and investors must continuously reevaluate their expectations to try to determine whether their investment and business strategies fit optimally with unfolding economic, demographic and climate trends. ForecastEx markets will reflect the consensus probabilities of market participants that certain levels of future economic or climate measures will fall within specific ranges.”
If an investor believes an event will occur, such as an increase in the US Consumer Price Index above a specific value, they can buy a “yes” contract. Conversely, if they think the event will not happen, they can purchase a “no” contract. Contract purchase prices range from $0.02 and $0.99. The value of these contracts will continue to fluctuate based on market participants’ evolving judgment of probabilities, directly reflecting the collective market view of the likelihood of the event. Upon the event’s resolution (e.g., when the US Bureau of Labor Statistics announces the CPI), the contract settles at a predefined value — $1 for a correct answer and $0 for an incorrect one.
ForecastEx contracts for the following indicators will be immediately available:
Economic
- US Fed Funds Target Rate
- US Consumer Sentiment
- US Housing Starts
- US Retail Sales
- US Building Permits
- US Consumer Price Index
- US Payroll Employment
- US Unemployment Rate
- US Corporate Profits
- US Initial Jobless Claims
- US National Debt
- US Real GDP
Climate
- Global Temperature
- US Temperature
- Atmospheric Carbon Dioxide
Eligible clients of Interactive Brokers can trade Forecast Contracts on IBKR ForecastTrader, an easy-to-use web platform, and can use their existing login credentials to access it. ForecastEx plans to expand internationally and cover additional local and controversial global issues. Contracts will be limited only by the availability of credible, impartial arbiters of event resolutions.
Source: Interactive Brokers
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