China's second commodity options, white sugar options, started trading on Zhengzhou Commodity Exchange Wednesday.
"Businesses can now use a combination of investment tools including spot contracts, futures contracts, and options to manage risks more effectively," said Ma Wensheng, chairman of Xinhu Futures, a Shanghai-based futures brokerage firm.
Unlike futures contract, options give investors the right but not the obligation to buy or sell the underlying assets at a predetermined price, effectively giving investors some insurance against future price volatility.
The white sugar options are China's second commodity options after soybean meal, currently trading on Dalian Commodity Exchange.
Fang Xinghai, deputy head of China Securities Regulatory Commission, said the financial instrument will facilitate the sustainable and healthy of the sugar industry, benefitting 40 million sugar cane farmers in China's remote and poor regions.
As demand for commodity derivatives rises, more futures and options products will be launched, according to Fang.