Pritam Biswas and Laura Matthews
(Reuters) – Cboe Global Markets reported higher first-quarter profit on Friday as strong demand for hedging products amid shifts in market volatility helped boost the exchange operator’s options trading volumes.
Geopolitical risks and macroeconomic uncertainty have increased volatility in markets, prompting investors and portfolio managers to hedge their positions.
The company’s average daily volumes (ADV) of general options increased to 14.83 million contracts in the quarter ended March 31, from 14.66 million contracts a year earlier.
Cboe’s net options proceeds rose 10% to $307.4 million.
That helped its adjusted net income rise to $227.7 million, or $2.15 per share, from $201.8 million, or $1.90 per share, a year earlier.
After the call with analysts, the company’s shares rose about 3.08% to $179.48.
“Given the current secular and cyclical tailwinds, we are well positioned as investors continue to incorporate options into their portfolios and trading strategies,” Fredrik Tomczyk, chief executive officer of Cboe Global Markets (NYSE:), said on an analyst call.
Investors taking advantage of lower volatility in the first quarter helped options ADV rise 17% to 3.2 million contracts. Meanwhile, options contracts opened on the same day they expire, or 0DTE (zero days to expiration), rose 32% to account for 48% of total SPX activity in the first quarter.
Options linked to the volatility index also saw strong demand from hedgers, with ADV in options up 4% as investors added cheap tail protection, said Dave Howson, global president of CBOE.
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“The resilience of our index options volume in the face of cyclical headwinds speaks to the strength of the long-term drivers of our business,” Howson said.
Last month, Cboe said it planned to shut down Cboe Digital Spot Market, its cryptocurrency spot trading platform, in the third quarter as it tries to refocus its business, citing a lack of regulatory clarity in the industry.
The company also plans to fully integrate its digital asset derivatives business into its existing global derivatives and clearing business as part of a strategic review.
The company’s first-quarter net revenue rose 7% to $502.1 million from a year earlier, while revenue from North America equities fell 1% to $92.6 million, compared with a 10% decline in that segment in previous quarter.