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Cboe Global Markets is launching extended trading hours for top mega-cap stock options, including the “Magnificent Seven,” allowing trading to begin two hours earlier than the main market. This strategic move is poised to significantly boost Cboe’s revenue, capitalizing on its business model that thrives on market volatility, as evidenced by its record Q1 performance driven by high single-stock volatility (VIXEQ).
Additionally, Cboe is partnering with Charles Schwab to introduce “Cboe Predicts,” a new platform for trading on market predictions, further diversifying its revenue streams and enhancing its resilience during periods of fluctuating market conditions.
Cboe Global Markets, a premier options and derivatives marketplace, is set to introduce new extended trading hours for a carefully selected group of multi-exchange mega-cap stock options. This significant development will allow investors to engage in options trading for these prominent companies two hours before the major indexes typically open.
The new extended trading window will commence at 7:30 a.m. ET, providing a substantial lead over the standard market open, and will remain active until 4:15 p.m. ET, extending 15 minutes past regular market close. These hours will be in effect from Monday through Friday.
The initial roster of approximately 20 handpicked stocks features all of the influential "Magnificent Seven": Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla. The list also includes other significant players such as Broadcom, Palantir, and Advanced Micro Devices.
This initiative represents a pivotal advancement for both Cboe and the broader financial markets. For the first time, traders will gain earlier access to these crucial market movers, a strategic advantage that is particularly beneficial for Cboe's unique business model.
Cboe Thrives on Market Volatility
A substantial portion of Cboe's revenue is generated through fees associated with trading on its index. Consequently, periods of heightened market volatility, often indicated by an elevated Cboe Volatility Index (VIX), typically lead to increased revenue for the company. The introduction of extended trading hours is expected to stimulate additional trading activity, further boosting revenue.
During the first quarter, the VIXEQ, Cboe's Constituent Volatility Index which gauges single-stock volatility, experienced a dramatic spike. Currently standing at 50, the VIXEQ has reached levels not seen since April 2025's tariff surge and ranks among its highest points over the past five years.
Significantly, there's a historically wide divergence between the VIX (currently at a relatively normal 15) and the VIXEQ. This spread indicates that while the overall market may appear calm, individual stocks are undergoing considerable volatility – a scenario Cboe is perfectly positioned to leverage.
It is thus unsurprising that Cboe reported a record-breaking Q1, with revenue climbing 29% and earnings surging 54% year-over-year. Options revenue alone increased by 33%, driven by a 10% rise in average daily volume. Transaction and clearing fees for options jumped 34%, while equity revenue also set a record, growing 18% year-over-year, with corresponding transaction and clearing fees up 40%.
Despite its stock soaring to an all-time high of $366 per share on May 13, marking a 46% gain year-to-date at that time, Cboe's share price has since corrected to $265, now showing an approximate 5% gain YTD. This pullback may be attributed to various factors, including profit-taking after its strong run, recent company layoffs, and a perceived calming of overall market volatility.
Introducing Cboe Predicts
In another forward-looking initiative, Cboe is collaborating with Charles Schwab to roll out a new prediction markets product known as Cboe Predicts. This platform will enable users to trade based on their predictions about future financial market movements.
Both the new prediction market product and the extended trading hours are anticipated to strengthen Cboe's revenue streams, offering a valuable hedge during periods when market volatility is less pronounced than it was in the exceptional first quarter.
While the broader VIX has returned to a more typical range, the VIXEQ remains exceptionally high. Given the ongoing volatility in single large-cap stocks, their potentially elevated valuations, and persistent geopolitical tensions, Cboe stock deserves to be on every investor's radar.
Currently trading at a more reasonable 22 times earnings, Cboe stock holds a median price target of $325 per share, suggesting a potential 21% increase in its value. For investors seeking a company that thrives amidst market turbulence, Cboe could present a compelling buying opportunity at its current valuation.
