CHICAGO - Cboe Global Markets, Inc. (Cboe: NYSE:CBOE) announced the upcoming launch of its Cboe S&P 500 Variance Futures (Ticker: VA) set to begin trading on Monday, September 23, on the Cboe Futures Exchange, LLC (CFE). The new financial product is designed to provide market participants with tools to manage volatility risks and express views on the U.S. equity market.
The introduction of these futures comes as investors face an uncertain economic climate, with factors such as the U.S. election, shifting monetary policy, and geopolitical tensions influencing market dynamics. Cboe's release highlighted that the futures are intended to offer a simplified method for trading the spread between implied and realized volatility.
Catherine Clay, Head of Global Derivatives at Cboe, emphasized the company's commitment to evolving its offerings in response to investor needs for various trading strategies. The futures are expected to attract a broad range of market participants, including volatility traders, hedge funds, institutional investors, and portfolio managers.
The contracts will be quoted and traded in variance units, with a contract size of $1, and settlement aligned with standard SPX options. Cboe also plans to introduce options on VIX Futures starting October 14, pending regulatory review.
Industry professionals have expressed support for the new product. Noel Smith from Convex Asset Management remarked on the utility of variance futures for dispersion trading and risk mitigation, while Keith DeCarlucci of Melqart Asset Management welcomed the introduction of a cleared variance product. Bill Looney of X-Change Financial Access (XFA) also noted the benefits of a listed alternative for trading variance.
The contracts will settle based on the annualized realized variance of the S&P 500 Index, calculated daily from a series of index values. This settlement process aims to integrate the futures into existing trading strategies seamlessly.
The announcement concludes with a reminder that trading in futures and options on futures involves substantial risk and may not be suitable for all investors. Cboe Global Markets does not endorse any securities or investments and advises investors to conduct their own due diligence. The information provided is based on a press release statement from Cboe Global Markets, Inc.
In other recent news, Cboe Global Markets has announced several significant developments. The company reported a 10% year-over-year increase in net revenue, reaching a record $514 million, and a 21% growth in adjusted diluted earnings per share to $2.15. Additionally, Cboe has increased its stock repurchase program by $500 million and raised its quarterly cash dividend to $0.63 per share.
The company has also launched the Cboe 20+ Year Treasury Bond ETF Volatility Basis Point Index, a tool offering insights into expected U.S. Treasury market volatility. Furthermore, Cboe announced its intention to introduce options on Cboe Volatility Index futures, subject to regulatory approval.
Analysts from Piper Sandler, JPMorgan (NYSE:JPM), and Citi have adjusted their price targets for Cboe, with Piper Sandler raising their target to $210, while JPMorgan and Citi upgraded their targets to $195 and $200 respectively. Despite an $81 million charge related to the wind-down of the CBOE Digital spot market, the company has reaffirmed its full-year 2024 adjusted expense guidance of $795 million to $805 million. These developments underscore Cboe's ongoing efforts to innovate and expand its product offerings while demonstrating strong financial performance.
InvestingPro Insights
As Cboe Global Markets, Inc. (Cboe: CBOE) prepares to expand its product offerings with the launch of Cboe S&P 500 Variance Futures, the company's financial metrics provide insights into its current market standing. According to InvestingPro data, Cboe is trading with a Price/Earnings (P/E) Ratio of 26.74, indicating a valuation that investors may consider high relative to near-term earnings growth. This aligns with one of the InvestingPro Tips, which notes that Cboe is trading at a high P/E ratio in comparison to its anticipated growth.
Moreover, the company's Price/Book (P/B) ratio stands at 5.48, which is another metric that suggests a premium valuation, as highlighted by another InvestingPro Tip. This could reflect the market's confidence in Cboe's assets and its ability to generate future profits.
Despite a slight decline in year-over-year revenue growth of -2.2%, Cboe has shown resilience with a robust gross profit margin of 52.39% in the last twelve months as of Q2 2024. This profitability is further underscored by the company's consistent dividend payments, having maintained them for 15 consecutive years and raised them for 9 consecutive years, a testament to its financial stability and commitment to shareholder returns.
For investors interested in a deeper dive into Cboe's financial health and future prospects, additional InvestingPro Tips are available. Currently, there are 10 more tips listed on InvestingPro (https://www.investing.com/pro/CBOE) that could provide further guidance on the company's performance and outlook.
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