Core Viewpoint - The article analyzes the strategies used by upstream companies in the sugar industry to hedge against price volatility through options, focusing on the effectiveness of different strategies during the 2023-2024 sugar market fluctuations [1][18]. Strategy Comparison - Sugar options have nonlinear profit and loss characteristics, providing companies with more strategies for risk management and enhancing operational stability [2]. - In 2023, the average daily trading volume of sugar options was 180,000 contracts, with an open interest of 420,000 contracts, indicating sufficient market size for hedging needs [2]. - Sugar prices experienced significant fluctuations, with a low of 5,500 yuan/ton and a high of 7,202 yuan/ton, prompting upstream companies to effectively utilize options to enhance profits [2]. Strategy Analysis - The article compares two main options strategies: covered call writing and protective put buying, focusing on their effectiveness in different market conditions [3]. - Covered call writing allows investors to enhance returns while holding long positions in sugar by selling corresponding call options, which can lower holding costs [4][6]. - Protective put buying serves as insurance against price declines, allowing companies to hedge against losses while still benefiting from potential price increases [9][10]. Experimental Setup and Parameters - The study uses market data from January 2023 to October 2024, during which sugar prices fluctuated from 5,500 yuan/ton to 7,200 yuan/ton, providing a complete bull-bear market cycle for analysis [12]. - The volatility index (VIX) for sugar showed significant fluctuations, with a minimum of 8 and a maximum of 24, indicating a representative market dynamic for strategy comparison [12]. Results Analysis - The performance of four strategies was evaluated, with the protective put strategy ranking first due to its effective risk management in both rising and falling markets [14]. - The covered call writing strategy performed poorly in rising markets, highlighting the importance of volatility and market conditions in strategy selection [15][16]. Conclusion - The article concludes that upstream companies in the sugar industry can effectively use options for hedging against price volatility, emphasizing the importance of market conditions and volatility in strategy selection [18].