Cboe profit beats estimates as elevated volatility spurs options trading boom
Strong Options Trading Volumes Drive Cboe's Record Performance
Market Volatility Fuels Trading Activity
July 31 (Reuters) - Cboe Global Markets reported a jump in second-quarter profit on Friday, topping Wall Street expectations, as it benefited from strong options trading volumes at a time of elevated market volatility.
Periods of market turbulence typically boost trading activity as investors seek to profit from price swings, while also increasing demand for options used to hedge portfolios against risk.
Cboe, the largest U.S. options exchange, has benefited from heightened market volatility driven by the U.S.-Iran conflict and shifting investor sentiment around the AI trade.
Record Options Volumes and Market Share
The firm reported record monthly and quarterly U.S. options volumes across its exchanges earlier this month, hitting a single-day record of 33.4 million contracts on June 5, when markets fell sharply.
Cboe holds the exclusive license to list options on the S&P 500 Index and offers a range of equity and derivatives products, including those tied to its flagship VIX volatility index, widely known as Wall Street's "fear gauge."
Comparison with Other U.S. Exchanges
Its results round off a strong quarter for U.S. exchanges, with Nasdaq, CME and Intercontinental Exchange reporting profit ahead of Wall Street expectations.
Their stocks, however, have come under pressure from chatter about the CFTC's approval of perpetual futures, which investors perceive as posing a threat to the market share of incumbent exchanges.
Cboe's Financial Results and Outlook
Cboe is the only stock among the exchange operators to have risen this year, with shares up over 18%, thanks to its market share in retail options trading and a workforce reorganization earlier this year.
It reported adjusted earnings of $3.56 per share, compared with $2.46 per share a year earlier. Analysts on average had expected $3.48 per share, according to data compiled by LSEG.
Net revenue from its options trading arm jumped 30% to $473.9 million as total average daily volumes rose 26%. Total net revenue was 25% higher at a record $731.6 million, also above estimates.
Raised Revenue Forecasts and Market Reaction
Cboe also raised its full-year organic net revenue forecasts, now expecting percentage growth in the mid-to-high-teens range, from its prior outlook of low double-digit- to mid-teens.
Shares of the company were up 1.2% in premarket trading.
Reporting Credits
(Reporting by Utkarsh Shetti in Bengaluru; Editing by Pooja Desai)
