Cboe beats third-quarter profit estimates on strong hedging activity

(Reuters) -Cboe Global Markets beat estimates for third-quarter profit on Friday, helped by strong options trading as investors actively hedged against geopolitical and economic uncertainties.

A robust equities market, shifts in the U.S. Federal Reserve’s key policy rates and the potential economic fallout from the Middle East conflict have investors and portfolio managers on edge, prompting them to hedge their positions.

Cboe’s options trading business revenue grew 10% compared with last year, while futures revenue climbed 17%.

Average daily volumes in total company options increased to 14.88 million contracts in the quarter ended Sept. 30, from 14.59 million a year earlier.

Volumes in options were also higher, with third-quarter ADV increasing to 4.23 million contracts from 3.74 million contracts. Meanwhile, options linked to the volatility index, increased 33% year-over-year.

Demand for options contracts opened on the same day they expire, or 0DTE (zero-days-to-expiry), grew 7% compared to last year and comprised 48% of S&P 500 volumes in the reported quarter.

Cboe’s third-quarter total revenue, less cost, rose 11% to $532 million from a year earlier, beating an estimate of $530.76 million, according to data compiled by LSEG.

The company now expects 2024 total net revenue growth in the range of 7 to 9 percentage points, compared to an earlier guidance of a rise of 6 to 8 percentage points.

The exchange operator’s net income allocated to common shareholders on an adjusted basis was $232.9 million, or $2.22 per share, in the three months ended Sept. 30, compared with $218.9 million, or $2.06 apiece in the year-ago period. Analysts were expecting a profit of $2.19 per share.

Cboe’s shares have gained 19.6% so far in 2024, outperforming peer CME Group (NASDAQ:), but below the Nasdaq and NYSE-parent Intercontinental Exchange (NYSE:).