Sugar Futures and Options Market Trading

Learn the most effective strategies for buying and selling options on futures contracts. Also learn producer and consumer hedging strategies.

*The information contained within this webpage comes from sources believed to be reliable. No guarantees are being made to the content's accuracy or completeness.

The History of Sugar and Sugar Futures Trading

For centuries, sugar has been a highly valued and widely traded commodity. Sugar cane production originated, according to historians, some 2,500 years ago on the Indian subcontinent. Today, sugar is a basic part of the production and consumption of many foods worldwide which has made sugar futures very necessary to hedge production and consumption price risk.

ICE Sugar Futures and Options Quick Facts

112,000 pound contract size
one cent move equals $1,120
trades Mar., May, July, Oct.
Sugar futures symbol (SB)

Here is a brochure from the ICE for sugar futures and options.

ICE sugar brochure

The September 11 terrorist attack destroyed the CSCE that was located in the World Trade Center in New York City. It was moved a nearby site and sugar future and sugar option trading were fully functional within within a few days after its destruction. It is a testament to the viability and strength of the futures markets. The Coffee, Sugar, and Cocoa Exchange merged with the (NYBOT) and again with the (ICE) and is the premiere world market for the trading of coffee, sugar and cocoa futures and options, and since 1993. Three sugar futures contracts (world raw, world refined, and domestic raw) are listed at the (ICE). In 1982, the CSCE launched the nation's first exchange-traded option on a futures contract when it introduced options on world sugar futures. Learn More >>>

Are you a sugar hedger? If so, click here to learn more.

Sugar Options on Futures Contracts Explained

A sugar call option gives the purchaser the right but not the obligation to purchase the underlying futures contract for a specific time period and a specific price (strike price). Let's say that you wanted to purchase a March sugar .14 cent call option and pay a premium of $800.

This means that you bought the right but not the obligation to buy 112,000 pounds of March sugar for .14 cents per pound. Of course, very few options are bought for the purpose of taking delivery but that is one potential outcome. Chances are that you either bought the sugar option to hedge your price risk in the physical sugar market (you may be a sugar cane farmer or and end user of sugar) or you are speculating that sugar prices will go higher in an attempt to make a profit.

A sugar put option gives the purchaser the right but not the obligation to sell the underlying futures contract for a specific time period and a specific price. Let's say that you wanted to buy a March sugar .13 cent put option and pay a premium of $1,400.

This means that you have the right but not the obligation to sell 112,000 pounds of March sugar at .13 cents per pound.

What is the delta factor?

The delta factor of an option represents the estimated percentage of change an option will receive based on the movements in the underlying futures contract.

Let's assume the March sugar .14 cent call option above has a 30% delta factor. This means that if the underlying futures contract were to rally by $1,000, then the call option would accrue by approximately $300 or 30% of $1,000 in the sugar futures contract.

What is theta?

Options are wasting assets which means that they lose value as time passes. The theta of an option is the measure of time decay.

Let's assume that you bought a March sugar .14 cent call option with 60 days left until expiration. Let's also assume that the sugar futures prices have moved very little over the last month and are exactly the same price 30 days later. Your option will have lost 30 days worth of time and therefore will be worth less today that it was when it had 60 days left until expiration.

What is vega?

Vega is a measure of the implied volatility of an option contract as it relates to its underlying futures contract. For instance, if the underlying futures contract is extremely volatile then the implied volatility of the options of that futures contract will be affected.

In a high implied volatility environment option premiums tend to expand. Conversely, in a low implied volatility environment the option premiums tend to decrease.

*Contract information changes from time to time. Please click here to see the most recent contract specifications and click here for the most recent trading hours.

Sugar Futures and Options Contract Specifications

Futures Contract Symbol- (SB)

Contact Size- 112,000 pounds

Trading Months -March (H), May (K), July (N) and October (V)

Minimum Price Movement - 1/100 cent/lb, equivalent to $11.20 per contract

Trading Hours- 2:30 am -2:00 pm Eastern Time

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