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Arbitrage

https://x.com/tropicaltidbits/status/1699936641077620810

@AviS Wow that was fast!! 3 days of strength in 3 hours or so!!

@BTE Yeah super impressive. The chances it will make landfall as a cat 5 in the US are extremely slim though.

https://www.cnn.com/2023/09/06/weather/hurricane-lee-potential-path-atlantic-climate/index.html

Hurricane Lee strengthens to Category 4 storm as it approaches the Caribbean | CNN

Hurricane Lee has strengthened into a major Category 4 storm with maximum sustained wind speeds of 130 mph, according to the 5 p.m. EDT advisory from the National Hurricane Center.

Arbitrage

https://www.aoml.noaa.gov/hrd/hurdat/All_U.S._Hurricanes.html?print=yes

Counting ones whose eye has made landfall in the US:

Category 1 total: 108

Category 2 total: 81

Category 3 total: 57

Category 4 total: 29

Category 5 total: 4

4 / 90 in the cat3-cat5 range that have made landfall are category 5 (4-5%)

https://tropical.colostate.edu/Forecast/2023-07-pressrelease.pdf

PROBABILITIES FOR AT LEAST ONE MAJOR (CATEGORY 3-4-5)

HURRICANE LANDFALL ON EACH OF THE FOLLOWING COASTAL

AREAS (AFTER 5 JULY):

1) Entire continental U.S. coastline - 50% (full-season average from 1880–2020 is

43%)

Taking 5% of 50% yields is 2.5% chance of cat 5 making landfall. This may be off in either direction (I don't know which) as my understanding is the distribution has changed in recent decades due to climate change. But given the market has 25% this seems too high and is not on line with my understanding of current indicators, so I am betting NO.

@parhizj yeah, it's like the people going YES didn't even look at base rate

Does it have to make landfall as a cat 5, or will it count if it reaches cat 5 but makes landfall at reduced strength?

@AlQuinn Has to make landfall as Cat 5.