Cboe’s quarterly profit beats estimates as investors crank up hedging activity
(Reuters) -Cboe Global Markets reported higher-than-expected second-quarter profit on Friday, helped by strong growth in options trading, as geopolitical tensions and elevated interest rates prompted investors to actively hedge their exposure.
Shares of the company climbed 3.4%, touching their highest in nearly five months.
Fears of potential economic shocks from the Russia-Ukraine war and the Middle East conflict have kept investors on edge even as markets rallied strongly this year, boosting the appetite for hedging.
Some are also questioning the sustainability of the rally due to tight monetary policy and the excessive focus on artificial intelligence-linked stocks.
Those worried about an eventual correction are taking advantage of the cheaply priced put options to hedge their portfolios. Put options are bearish bets that let traders sell an asset at a set price in the future.
Cboe has also sharpened its focus on its core businesses by shuttering its spot digital asset trading platform. Its digital segment recorded an $81 million impairment of intangible assets related to the wind-down.
“The strategic review has provided us with the framework to hone our strategy and determine how to best leverage our core strengths (and) reallocate our resources internally,” CEO Fredric Tomczyk said.
But excluding one-time costs, the company earned $2.15 per share, versus an expectation of $2.10, according to LSEG. Revenue jumped 10% from last year, to $513.8 million.
The earnings round out a strong quarter for exchanges, which have seen robust growth in their core business of trading as investors return to the markets, encouraged by hopes of a soft landing for the economy.
Cboe’s options trading business fetched 8% higher revenue compared with last year, while futures revenue climbed 19%.
Its shares have gained 4% so far this year, outperforming peer CME Group (NASDAQ:) but far below Nasdaq and NYSE-parent Intercontinental Exchange (NYSE:).
