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.