Key Points
Options and derivatives marketplace Cboe Global Markets (NYSEMKT: CBOE) plans to launch new extended trading hours for select multi-exchange mega-cap stock options.
The extended hours will see the market open for options trading for these select stocks at 7:30 a.m. ET, two hours earlier than the major indexes open for trading. It will stay open until 4:15 p.m. ET, 15 minutes past the rest of the markets. This is for Monday through Friday only.
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The 20 or so select stocks are all mega-caps, including all the Magnificent Seven stocks — Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla. It also includes big names like Broadcom, Palantir, and Advanced Micro Devices.
This is a huge development for Cboe and the markets in general. Now, for the first time, investors will be able to trade stock options for the Magnificent Seven and other market movers two hours before the market opens. That is beneficial for Cboe. Here’s why.
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Cboe thrives on volatility
Cboe generates most of its revenue from fees tied to trading on its index. So, the more volatility there is, and the higher the Cboe Volatility Index (VIX) goes, the more revenue Cboe typically generates. So with trading hours extended, it would lead to additional trading and revenue.
In the first quarter, the VIXEQ, Cboe’s Constituent Volatility Index, skyrocketed. The VIXEQ measures the volatility of single stocks as opposed to the whole market. The VIXEQ is currently at 50, the highest its been sinced the tariff spike in April 2025 and one of the highest levels in the past five years.
But more importantly, the spread between the VIX and the VIXEQ is at historically wide levels as the VIX is at a pretty normal level — 15. This means that single stocks are highly volatile, but that voilàtility is masked by a seemingly calm overall VIX.
It is no coincidence that Cboe had a record Q1, with revenue up 29% and earnings up 54% year over year. Options revenue increased 33%, due to a 10% increase in options average daily volume. Transaction and clearing fees for options were up 34%. Equity revenue also set a record, up 18% year over year, with transaction and clearing fees rising 40%.
Cboe stock spiked to an all-time high of $366 per share on May 13, and at that time it was up 46% year to date. It has since come crashing back down on perhaps several factors. There may have been profit-taking, particualrly after the company announced layoffs and volatility appeared to have subsided. Now, Cboe stock is trading at $265 per share, up about 5% YTD.
Cboe Predicts
Cboe is also rolling out a new prediction markets product, in conjunction with Charles Schwab, called Cboe Predicts.
It will allow users to trade on predictions about financial markets. The prediction market product and extended trading hours should help Cboe boost revenue, which could help support revenue when markets are less volatile than they were in Q1.
The VIX has settled down and is back in a more normal range but the VIXEQ is extremely high. With the VIXEQ high, large-cap stocks still overvalued, and geopolitical conflicts ongoing, Cboe stock should be one to keep on your radar.
Cboe stock is trading at a more reasonable level at 22 times earnings. The stock has a median price target of $325 per share, which would represent a 21% increase in price.
Cboe stock might be worth buying at this valuation, because if the market gets wild again, you know youʻll have a stock that thrives on volatility.
Should you buy stock in Cboe Global Markets right now?
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Cboe Global Markets. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
