Cboe posts higher profit as market volatility boosts options trading

By Pritam Biswas and Laura Matthews

(Reuters) -Cboe Global Markets reported a rise in first-quarter profit on Friday, as strong demand for hedging products amid shifts in market volatility helped boost the exchange operator’s options trading volumes.

Geopolitical risks and macroeconomic uncertainties have fueled volatility in the markets, prompting investors and portfolio managers to hedge their positions.

Average daily volumes (ADV) in total company options increased to 14.83 million contracts in the quarter ended March 31 from 14.66 million a year earlier.

Net revenue from Cboe’s options rose 10% to $307.4 million.

This helped its adjusted net income to grow to $227.7 million, or $2.15 per share, from $201.8 million, or $1.90 per share, a year earlier.

Following a call with analysts, shares of the company were up about 3.08% at $179.48.

“Given the secular and cyclical tailwinds in place, we are well positioned as investors continue to utilize options in their portfolio and trading strategies,” Fredric Tomczyk, chief executive officer at Cboe Global Markets, said on an analysts call.

Investors taking advantage of lower volatility in the first quarter helped ADV in S&P 500 index options rise 17% to 3.2 million contracts. Meanwhile, options contracts opened on the same day they expire, or 0DTE (zero-days-to-expiry) rose 32% and made up 48% of overall SPX activity in the first quarter.

Options linked to the VIX volatility index also saw strong demand from hedgers, with ADV in call volume rising 4%, as investors added cheap tail protection, said Dave Howson, global president at CBOE.

“The resilience of our index options volume, in the face of cyclical headwinds, speaks to the strength of the secular drivers of our business,” Howson said.

Cboe said last month it plans to wind down operations of Cboe Digital Spot Market, its spot trading platform for cryptocurrencies, in the third quarter in a bid to refocus its business, citing lack of regulatory clarity in the industry.

The company also plans to fully integrate its digital asset derivatives business into its existing Global Derivatives and Clearing businesses as a part of strategic review.

Its first-quarter net revenue rose 7% to $502.1 million from a year earlier, while revenue from North America equities dropped 1% to $92.6 million, compared with a 10% fall in the segment in the previous quarter.

(Reporting by Pritam Biswas in Bengaluru and Laura Matthews in New York; Editing by Shinjini Ganguli and Jonathan Oatis)