Wow what a couple of weeks! Hurricane Harvey demolished the Texas coast and Florida is bracing for the most powerful hurricane in history while over 1500 fires are burning across the American west. These tragic events bring destruction and spread devastation when they strike. The toll in human suffering and loss of life is heartbreaking.
As traders we can do our part by offering donations and volunteering for rescue and cleanup efforts. There are ways to potentially profit from relatively predictable market moves in response to major natural disasters. Some of these profits can be funneled to the people in need in the form of donations.
The most obvious plays on a major storm like Harvey or Irma is to watch the major home improvement suppliers for bullish moves and buy call options on those companies. These might include Lowes (LOW) or Home Depot (HD). These stocks have experienced large bullish moves ahead of and immediately after hurricane Harvey and may see additional moves higher after Irma’s damage has been tallied.
The other side of the coin is the potential for a bearish move on insurance companies that will have massive payouts after the storms have done their damage. As an example, The Hanover Group (THG) stock suffered a 10% price drop as hurricane Harvey hit Texas.
Oil stocks and refineries are almost always affected by hurricanes as production, refining, storage facilities and shipping ports are often closed or adversely affected. This can cause oil prices to spike and create short term gas shortages.
One of the areas that is often overlooked is the staggering number of vehicles that are lost to flooding. These vehicles will need to be replaced and new car sales may jump significantly as people use insurance money to upgrade to a new vehicle. Ford (F) and General Motors (GM) both experienced significant rallies on news of the massive flooding in Southeast Texas.
Money can be made in the longer term as natural disasters and the destruction they bring often spurs new growth and opportunity.
There is a very real human cost to these disasters and generating profit from them can be a source of donations to those who need it most.
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