CBOE: Priced for a Threat That Isn't There
Cboe Global Markets ($CBOE) is down 33% from its recent high, trading around $264 on a business that just posted 29% net revenue growth, 48% adjusted EPS growth, and raised full year guidance. Q1 2026 adjusted EPS came in at $3.70 versus $3.37 expected, a 9.8% beat.
Yesterday SpaceX options began trading on Cboe. The exchange's own senior vice president called this an "unusually busy" week. Cboe expects future options listings for both OpenAI and Anthropic after their IPOs.
The market sold CBOE because it fears Kalshi's Bitcoin perpetual futures will eventually threaten Cboe's core equity derivatives business. Kalshi is simultaneously fighting cease-and-desist orders in Nevada, New Jersey, and Maryland, facing federal enforcement actions for insider trading, and being discussed in Congress for product restrictions. The platform the market is pricing as an existential threat to Cboe may be geo-fenced out of 15 states by year-end.
What Cboe Actually Does
Cboe operates the largest US options exchange and is one of the largest exchange operators globally. They operate across five business segments: Options, North American Equities, Europe and Asia Pacific, Futures, and Global FX.
The core products are options and futures: contracts that allow investors and institutions to hedge positions, express views on volatility, and manage risk. The VIX, the most widely referenced measure of US stock market volatility, is Cboe's intellectual property. SPX options (contracts tied to the S&P 500 index) are exclusively listed on Cboe under a licensing agreement with S&P Dow Jones Indices, no other exchange can list them.
That exclusivity is the moat. SPX options generated $467.6M in net revenue in Q1 2026 alone from the Options segment. Kalshi's Bitcoin perpetual futures do not compete with SPX options, VIX options, or the institutional derivatives infrastructure Cboe has spent 50 years building.
The Q1 2026 Numbers
Per the Q1 2026 10-Q filed May 1st:
Total revenue $1.272B (+6% YoY). Net revenue $728.9M (+29% YoY). Operating income $505.6M (+35% YoY). Net income $385.7M (+54% YoY). Diluted EPS $3.66 vs. $2.37 in Q1 2025. Adjusted EPS $3.70 vs. $3.37 consensus.
Options segment net revenue $467.6M, the largest segment by a significant margin. Index options average daily volume reached 6.1 million contracts (+29% YoY), driven by sustained growth in Zero-Days-to-Expiration (0DTE) SPX options. Global FX net revenue +38% YoY. Operating cash flow $1.96B, more than double the $912.9M from Q1 2025.
Adjusted Operating EBITDA grew 41% to $541M with margin expanding 6.1 percentage points to 74.2%. For context, that means Cboe keeps $0.74 of every net revenue dollar after operating costs. Most financial businesses would consider 50% exceptional.
0DTE SPX options (contracts that expire the same day they trade) represented 59% of all SPX volume in 2025, averaging 2.3 million contracts per day. In 2016, they were 5% of volume. On peak volatility days (FOMC decisions, CPI releases, earnings surprises) daily 0DTE volume has exceeded $1 trillion. The PDT rule elimination in June 2026 expands the retail pool that can access these products, growing the total addressable market. Every one of those contracts clears through Cboe.
Balance sheet: total assets $11.07B, debt $1.44B, stockholders' equity $5.37B. Margin and default fund balances more than doubled from $1.6B to $3.4B in the quarter, a direct measure of clearing activity that confirms the volume numbers in the segment data.
In May 2026 Cboe divested its Canadian and Australian businesses to TMX Group for $300M to focus capital on core strengths rather than peripheral operations. The full year guidance does not yet include $100-120M in annualised savings from the strategic realignment. The Canada and Australia divestitures contribute $40-50M of that figure. When those savings flow into 2026 and 2027 numbers the guidance is conservative relative to what the business will actually deliver.
Full year guidance raised to low double-digit to mid-teens organic revenue growth, up from mid single-digits prior guidance. Quarterly dividend $0.72 per share.
SpaceX Options and the IPO Pipeline
SpaceX options launched yesterday (June 16th) across multiple exchanges including Cboe, breaking every record in US options market history. Henry Schwartz, Cboe's VP of Derivatives Market Intelligence, told MarketWatch "the exchange was seeing 10,000 contracts per minute early in the session, tracking toward 2 million total contracts on day one". The previous first-day record was Meta in 2012 at 364,000 contracts, SpaceX options are on pace to beat that by roughly 5x. By yesterday's close SPCX options were already the third-largest single-stock options holding among retail investors on the Apex Fintech clearing platform, which provides back-end infrastructure for dozens of retail brokerages including Webull, trailing only Tesla and Nvidia.
Cboe also launched leveraged SpaceX ETFs on June 15th: SPCM (2x Long SpaceX) and SPCG (2x Short SpaceX), generating the kind of retail and institutional activity that flows directly into Cboe's revenue.
Cboe has already confirmed it expects future options listings for both OpenAI and Anthropic after their IPOs. OpenAI is targeting a listing as early as Q4 2026. Anthropic is working with Goldman Sachs, JPMorgan, and Morgan Stanley toward an October listing.
Every major IPO generates options activity and every options contract on a US-listed equity that trades on Cboe generates revenue. The 2026 IPO pipeline, with SpaceX already listed, OpenAI and Anthropic likely before year-end, is the most concentrated near-term revenue catalyst Cboe has seen in years.
On May 28th the SEC approved Cboe to offer extended trading hours for select single-stock options from July 13th, pre-market from 7:30am to 9:25am ET and post-market from 4:00pm to 4:15pm ET. Approximately 20 names are eligible at launch including all seven MAG7 stocks. Cboe's existing Global Trading Hours for its proprietary index options already hit record volumes in Q1 2026, +32% YoY driven by Asia-Pacific demand. Extended hours for single-stock options taps the same demand pool.
The Kalshi Threat: What the Filings Show
On June 2nd the CFTC approved Kalshi to offer Bitcoin perpetual futures. CBOE fell 17% in a week with the market pricing this as the beginning of an existential competitive threat to Cboe's derivatives business.
Here is what Kalshi's actual situation looks like. Nevada, New Jersey, and Maryland gaming regulators have issued cease-and-desist orders claiming Kalshi operates as an unlicensed gambling platform. The company is actively defending against each. If regulators in multiple states succeed, Kalshi faces a geofence covering up to 15 states.
The CFTC has initiated the first-ever federal enforcement action against Kalshi for insider trading, specifically involving political candidates betting on their own election outcomes. The regulator that approved Kalshi's Bitcoin futures is simultaneously investigating Kalshi for securities violations.
Democratic lawmakers have formally petitioned the CFTC to ban insider trading on event contracts and restrict certain categories of event contracts entirely, including those tied to war, elections, government action, and sports.
More importantly, Kalshi's Bitcoin perpetual futures do not compete with what Cboe does. SPX options are for institutional portfolio hedging, pension fund risk management, and sophisticated derivatives strategies built over 50 years. Bitcoin perpetual futures are retail speculation products, the competitive overlap is minimal.
Cboe's 10-Q explicitly identifies "loss of our right to exclusively list and trade certain index options and futures products" as the primary business risk. The exclusive licensing arrangements with S&P Dow Jones Indices are contractual, not casual, and Kalshi has no mechanism to compete for that exclusivity.
Cboe also announced a Mini-SPX prediction market contract in March 2026, planned for launch before end of June. Unlike Kalshi's binary event contracts, Cboe's framework introduces a third outcome: a partial payout when traders are directionally correct but not precisely on target. This is Cboe moving into Kalshi's territory using its own exchange, its own clearing, and its own SPX ecosystem.
The Insider Picture
The insider picture is mixed. Director Janet Froetscher sold 1,223 shares at $358.09 on May 18th under a Rule 10b5-1 plan adopted in February, pre-scheduled before the Kalshi selloff, she still holds 13,807 shares. Edward Fitzpatrick filed an Intent to Sell Form in February 2026 for 4,000 shares at approximately $286.
No named insider has made an open market purchase since the June 2nd selloff.
In May 2026 Cboe hired Julie Bauer as SVP Head of Government Relations, a senior regulatory affairs executive, hired before the Kalshi ruling materialised. Management was building its regulatory positioning before the threat became a headline.
The corporate conviction signal here is the capital return programme rather than personal insider buying. Cboe paid a $0.72 per share dividend in Q1 and continued buybacks while producing $1.96B in operating cash flow.
The Risks
The SPX concentration is the real long-term risk, and the 10-Q flags it. Options segment net revenue was $467.6M of $728.9M total, 64% of net revenue came from one segment, most of which is tied to the S&P index licensing relationship. If S&P Dow Jones Indices renegotiated terms at renewal or moved the franchise, the impact on Cboe's Options segment revenue would be immediate.
On the Q1 earnings call the CEO was asked directly about potential SPX competition in 2032, a reference almost certainly tied to the SPX licensing agreement renewal timeline. His answer was direct: SPX volume has grown 300% over five years, the partnership with S&P is long-standing, and the ecosystem of electronic and floor trading participation is intentional and difficult to replicate. The 2032 date is worth knowing, it marks the point at which the exclusivity arrangement could theoretically be renegotiated. It is also six years away on a product that just grew 300% in five years.
The Kalshi regulatory precedent is genuinely uncertain. The CFTC already approved Bitcoin perpetual futures. That precedent could extend (slowly, over years) to other asset classes. The speed and scope of that extension is unknown, Cboe's moat is strong, but regulatory change is always a risk.
Cboe's options exchange market share has slipped to 29.1% from 31.1% YoY, and US equities market share to 9.8%. Competitive pressure in multi-listed options is real even as proprietary SPX volumes grow.
My View
Cboe posted the best quarter in its history. Net revenue +29%, adjusted EPS +48% and operating cash flow more than doubled. The stock is down 33% from its recent high because the market fears a platform that is simultaneously fighting cease-and-desist orders in three states, facing federal enforcement, and may be geofenced out of 15 states by year-end
On the same day the stock fell 9.45%, a Cboe VP confirmed SpaceX options set the most active first-day trading record in US options market history. The business the market says is decelerating broke a 14-year record while the stock was selling off.
The near-term pipeline is the strongest in years. Extended trading hours for single-stock options launch July 13th. OpenAI and Anthropic both targeting listings before year-end. The Mini-SPX prediction market contract launches before June 30th, moving Cboe directly into Kalshi's territory on Cboe's own infrastructure.
For me this is a buy, I have initiated a position with 200 shares at $269.35 average. The Kalshi threat is real as a regulatory precedent question and worth watching. As a competitive threat to SPX options it is not. The 0DTE volume that drove 59% of all SPX contracts in 2025 does not care about Bitcoin perpetual futures, it cares about the S&P 500 moving every day, which it will continue to do regardless of what the CFTC approves next.
Since Publication
CME Group (world's largest futures exchange operator), filed a federal lawsuit against the CFTC on June 18th arguing Kalshi's perpetual futures are misclassified swaps under the Dodd-Frank Act. CME CEO Terry Duffy stated he spent eight months preparing the case with his board. On the same day a Michigan federal judge ruled sports prediction markets fall outside CFTC jurisdiction, dealing a simultaneous legal blow to the CFTC's expansive regulatory interpretation. If CME succeeds, Kalshi's product either gets blocked entirely or gets rerouted through CME's clearing infrastructure. The threat that caused CBOE to fall is now being challenged in federal court.
Ticker Thoughts is independent analysis and not financial advice. Current position at time of publication: 200 shares at $269.58 average. All open and closed positions are detailed on the positions page.