The Chicago Board Options Exchange (CBOE), located at 400 South LaSalle Street in Chicago, is the largest U.S. options exchange with annual trading volume that hovered around 1.27 billion contracts at the end of 2014.
CBOE offers options on over 2,200 companies, 22 stock indices, and 140 exchange-traded funds (ETFs). The Chicago Board of Trade established the Chicago Board Options Exchange in 1973.
The first exchange to list standardized, exchange-traded stock options began its first day of trading on April 26, 1973, in celebration of the 125th birthday of the Chicago Board of Trade.
The CBOE is regulated by the Securities and Exchange Commission and owned by Cboe Global Markets.
CBOE is one of a handful of pure options exchanges in the U.S. with its large size making it the dominant player in the options space.
Given the steady and consistently rising amount of trading occurring globally, there's no shortage of demand for hedging various asset classes. The CBOE is thus a steady repeat-business and a longterm stock in one's portfolio.
Average daily volume for one of the CBOE's most popular products. Mini-SPX.
CBOE vs the SP500
The stock has a beta of 0.3 against the SP500 and has been steadily rising during the last years, in line with overall increased trading within the exchange-sectors as previously discussed in our article series. It is therefore no surprise that the stock will continue marching on higher.
Consesus EBITDA-estimates support this view, which stretch into 2021.
Currently P/E is at 17.7x which is slightly overvalued but not unrealistic given its growth prospects.
We therefore give CBOE a BUY, with a target price of 130$ before the end of 2019 (Q4)*.
Profiting strategies on the future developments surrounding the stock are numerous;
1. Purchasing a deep-in-the-money call-options with a strike at 115 $, (with an expiry 1-1.5 years in to the future*) would offer substantial leverage. Basically entering a synthetic-long-stock position.
2. Purchasing the stocks themselves.