- If UGG is interested, for example, in creating a custom derivatives contract to manage its exposure to weather risk for its wheat business in Alberta, the following equation could be used as a Weather Index for yeart. Weather Index = -0.76 x Avg.June Temp. + 2.70 x Avg. July Precipitation, Discuss how this index could be used to write an options contract that would compensate UGG for its losses when the index value is below a certain threshold (the strike price of the options contract), and the option would expire out of the money if the index is above the threshold. Should the firm buy or sell a put or call option to hedge its wheat exposure in Alberta