{"id":229701,"date":"2025-08-27T10:45:00","date_gmt":"2025-08-27T14:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=229701"},"modified":"2025-08-27T11:05:27","modified_gmt":"2025-08-27T15:05:27","slug":"do-we-still-expect-an-active-hurricane-season-8-27-2025","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/forecast-trader\/do-we-still-expect-an-active-hurricane-season-8-27-2025\/","title":{"rendered":"Do we still expect an active hurricane season? [8\/27\/2025]"},"content":{"rendered":"\n

Atlantic Hurricane Count Prediction Market Update 8\/27\/2025<\/p>\n\n\n\n

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Entering the 2025 Atlantic hurricane season, most seasonal forecasts predicted above-normal hurricane activity, driven primarily by warm sea surface temperatures and cool to neutral El Ni\u00f1o conditions<\/a>.<\/p>\n\n\n\n

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\"2025<\/figure>\n\n\n\n

From Artemis<\/a>. <\/p>\n\n\n\n

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This sentiment is still reflected in ForecastEx\u2019s market<\/a> for the total 2025 Atlantic Hurricane Count, which, for example, indicates a 60% chance of 8 or more hurricanes, whereas the average is around 7. <\/p>\n\n\n\n

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\"Hurricane<\/figure>\n\n\n\n

From ForecastTrader<\/a>.<\/p>\n\n\n\n

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However, as of today, August 27th, 2025, Hurricane Erin remains the only hurricane of the season so far<\/a>. <\/p>\n\n\n\n

Is hurricane activity about to pick up? <\/p>\n\n\n\n

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The National Hurricane Center continuously forecasts the likelihood of tropical cyclone development over the next week:<\/p>\n\n\n\n

\"Fernand<\/figure>\n\n\n\n

From NOAA National Hurricane Center<\/a>.<\/p>\n\n\n\n

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Fernand will not reach hurricane strength, and the outlook does not currently identify any other disturbances primed for development over the next 7 days. <\/p>\n\n\n\n

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The NOAA Climate Prediction Center<\/a> provides weekly-scale forecasts for tropical cyclone development two to three weeks in advance (updated every Tuesday). <\/p>\n\n\n\n

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One important input to these forecasts is sea surface temperatures. While sea surface temperatures remain more than sufficiently warm for tropical cyclone development over much of the Atlantic basin (>27\u00b0C), there is a wedge of relatively cool sea surface temperatures left in the wake of Hurricane Erin (which results mainly due to winds mixing the ocean and drawing up cooler ocean waters from below). <\/p>\n\n\n\n

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\"CDAS<\/figure>\n\n\n\n

From Tropical Tidbits<\/a>.<\/p>\n\n\n\n

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The other key input to these weekly-scale forecasts is large-scale changes in atmospheric conditions, such as those associated with the Madden-Julian Oscillation<\/a> (which alters the probability of tropical cyclone formation by alternatively enhancing or reducing thunderstorm activity over areas where cyclones tend to develop).<\/p>\n\n\n\n

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Overall, these weekly-scale Climate Prediction Center forecasts indicate regions with a 20% to 40% chance of development next week (9\/3-9\/9) and separate regions with a 20% to 40% chance of development and a 40% to 60% chance of development for two weeks from now (9\/10-9\/16). That does not constitute an expectation for a very rapid uptick in tropical cyclones over the next couple of weeks. It is also worth noting that ECMWF\u2019s subseasonal tropical cyclone forecast product<\/a> is not flagging obvious storm development through September 22nd.<\/p>\n\n\n\n

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\"Global<\/figure>\n\n\n\n

The NOAA Climate Prediction Center<\/a>.<\/p>\n\n\n\n

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So, what does all this mean in the context of ForecastEx markets indicating a high chance for an above average hurricane season? <\/p>\n\n\n\n

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The situation can change dramatically very quickly, but in my view, evidence is beginning to mount against the higher hurricane count numbers.<\/p>\n\n\n\n

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To illustrate, consider the following simple calculation. Below is the typical cumulative count of hurricanes in the Atlantic, represented in black, along with the range from 1950 to 2024 in grey. <\/p>\n\n\n\n

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\"Cumulative<\/figure>\n\n\n\n

From NOAA HURDAT2 Data<\/a> processed and plotted in Matlab. <\/p>\n\n\n\n

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I am also showing a projection for the remainder of 2025 in red with a range in pink. The pink distribution range is created by taking the remainder of the count trajectories from a given date going forward and appending them to the observed count so far for that date. Based on this range of trajectories going forward, I can calculate the probability of breaching the defined count thresholds in the ForecastEx Atlantic Hurricane Count market<\/a>. <\/p>\n\n\n\n

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Based on the National Hurricane Center’s lack of identification of any areas to watch for development over the next week, I am showing results for a situation where we have still only seen one hurricane (Erin) by September 3rd. <\/p>\n\n\n\n

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All this seems to indicate that the current ForecastEx market probabilities for YES are too high, and the current market probabilities for NO are too low. Thus, there seems to be an opportunity emerging to obtain some good value by purchasing NO contracts at these prices.<\/p>\n\n\n\n

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Further Reading<\/h2>\n\n\n\n