Cboe exceeds profit expectations as volatility spurs options trading boom

By Utkarsh Shetti

July 31 (Reuters) - Cboe Global Markets reported a jump in second-quarter profit on Friday, surpassing Wall Street expectations, as it benefited from robust options trading volumes at a time of heightened 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 elevated market volatility driven by the U.S.-Israeli war on Iran as well as shifting investor sentiment around the AI trade.

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."

In a call with analysts, executives highlighted a surge in simple order counts — single options trades rather than spreads or those with complex structures — as a signal of broader retail engagement for its products.

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 a threat to the market share of incumbent exchanges.

"Cboe continues to fire on all cylinders, although the bear case narrative of perpetual futures lingers as an overhang on the stock," Raymond James analyst Patrick O'Shaughnessy said in a note.

Cboe is the only stock among the exchange operators to have risen this year, gaining more than 18%, thanks to its market share in retail options trading and a workforce reorganization it announced in May.

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.

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 rose nearly 2% in early trading.

(Reporting by Utkarsh Shetti in Bengaluru; Editing by Pooja Desai)