Weather Edge Tool

Kalshi Weather Markets — Where the Edge Lives

Kalshi runs daily “high temperature” markets for 8 major U.S. cities. Each contract resolves YES if the official NWS high for that city hits a specific threshold — like “Denver high above 72°F.” The market price is the crowd's implied probability. The question is whether that crowd price is right.

The model uses a simple but effective approach: take the NWS 24-hour forecast high as the center (μ) and fit a normal distribution with sigma (σ) derived from 30 years of NOAA climate data for that city and month. That gives a clean probability for any temperature threshold — no guesswork, just statistics. When the model probability diverges from the Kalshi price by 5+ percentage points, that's the edge.

Why weather markets are tradable

Temperature forecasts are among the best-validated probabilistic forecasts in the world. NWS day-1 highs are accurate to within 3–4°F roughly 80% of the time. Kalshi's temperature markets, on the other hand, are set by retail traders who often anchor on round numbers and don't correctly account for forecast uncertainty. That's the gap. The model exploits it systematically.

Sizing the trade

The tool outputs quarter Kelly as a default sizing recommendation. Full Kelly is aggressive for any single market — a quarter of that gives you a sustainable bankroll fraction that survives variance without blowing up. Pair the edge signal with the Kelly Criterion Calculator to dial in your exact position size.

What the engine scans

Every morning at 6 AM ET, the engine pulls the latest NWS forecast for Denver, New York City, Chicago, Los Angeles, Miami, Phoenix, Seattle, and Atlanta. It matches each city to its active Kalshi temperature markets, runs the normal distribution model, and scores each edge by magnitude × log(volume). The highest-scoring play with edge ≥ 5pp and volume ≥ $500 becomes the best play of the day.