Cboe tops profit estimates as market volatility boosts hedging activity

By Prakhar Srivastava

Aug 1 (Reuters) - Derivatives exchange Cboe Global Markets CBOE.Z beat Wall Street estimates for second-quarter profit on Friday, as looming economic uncertainties fueled market turmoil and boosted options trading, sending its shares up more than 3%.

A spike in volatility fueled by renewed geopolitical tensions in the Middle East and unpredictable tariff policies lifted trading volumes as investors and portfolio managers rushed to hedge their positions, marking a robust period of activity for the industry.

Cboe wrapped up a strong quarter for U.S. exchanges such as CME Group CME.O, Nasdaq NDAQ.O and Intercontinental Exchange ICE.N.

Average daily volume in index options hit 4.7 million contracts during the quarter ended June 30, compared with 4 million a year earlier.

Continued uncertainty regarding monetary and trade policy was expected to support the use of options to dynamically manage risk, Cboe CEO Craig Donohue said on a post-earnings call.

The company's options trading business revenue jumped 19% to a record $364.8 million, while Europe and Asia-Pacific revenue climbed 30% to $70 million.

"While institutional activity was robust in April, retail traders pulled back as evidenced by decreasing share of 0DTE volume," Donohue said.

"Retail investors tend to step back when volatility jumps unexpectedly as it did in April."

Cboe posted adjusted net income of $2.46 per share, compared with analysts' estimate of $2.42 per share, according to data compiled by LSEG.

Net revenue rose 14% to a record $587.3 million, also beating the estimate of $576.2 million.

"It was another remarkable quarter supported by macro uncertainty," Oppenheimer analysts said in a note.

CBOE expects annual organic net revenue growth to be in high single-digit percentage, compared with mid-to-high single-digit percentage forecast previously.

Last week, the company announced plans to wind down its Japanese equities business, citing challenges to financial sustainability.