CBOE — the options exchange monopoly at a 5-year P/E low, with a -31% drawdown and RSI 27

Stock: Cboe Global Markets, Inc. (BATS: CBOE) | Sector: Financials / Financial Exchanges & Data | Market cap: $26.65B 1

Price (Jun 17, 2026 close): $254.69 | 52-week range: $223.54–$371.18 | Next earnings: July 31, 2026 (estimated, before market open) 2

Why CBOE passed the screen today

Six candidates entered today's screen. CBOE was the strongest qualifier.

Criterion	CBOE result	Pass?
ROE > 15% — FY2023	20.44% (avg-equity) / 19.1% (period-end) 3 4	✅
ROE > 15% — FY2024	18.51% (avg-equity) / 17.9% (period-end) 3 4	✅
ROE > 15% — FY2025	23.36% (avg-equity) / 21.4% (period-end) 3 4	✅
FCF positive — all years	$1,031M / $1,040M / $1,682M / $2,724M TTM 5	✅
Valuation reasonable	Trailing P/E 21.75× vs. 5-yr avg ~32.0× 1	✅
WM (Waste Management)	P/E 31.24× — qualified but CBOE selected on superior valuation + ROE quality	Runner-up
ROL (Rollins)	P/E 41.39× — too expensive	❌
AJG (Arthur J. Gallagher)	ROE below 15% in at least one year (<12.88%)	❌
ICE (Intercontinental Exchange)	ROE below 15% in at least one year (<11.88%)	❌
CSGP (CoStar Group)	ROE below 15% (<5.28%)	❌

ROE methodology note: FY2023–FY2025 primary figures use StockAnalysis's average-equity method (beginning + ending equity divided by 2). SEC XBRL period-end cross-verification uses confirmed net income from the 10-K filings ($761.4M / $764.9M / $1,100.0M for FY2023–FY2025) divided by StockAnalysis year-end equity ($3,985M / $4,280M / $5,138M). Both methods confirm every year clears the 15% threshold by a comfortable margin. 4 3

Trailing P/E

21.75×

FCF Yield

10.22%

ROE (FY2025)

23.36%

P/FCF

9.78×

EV/EBITDA

14.63×

Next earnings

Jul 31

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What Cboe actually does

Founded in 1973 and headquartered in Chicago, Cboe Global Markets operates the largest U.S. options exchange by volume and owns the VIX index franchise — the measure of near-term expected volatility in the S&P 500 that traders worldwide use as a benchmark for market fear. 1

The business runs across six segments:

Options: SPX and VIX options traded on Cboe's Chicago floors and electronic venues — the highest-margin, highest-volume part of the business
North American Equities: four U.S. equity exchange venues (BZX, BYX, EDGX, EDGA) competing for market share in listed stock trading
Futures: CFE (Cboe Futures Exchange), home to exclusive VIX futures trading
Europe & Asia Pacific: Pan-European equity trading and data via Cboe Europe
Global FX: Cboe FX, a dealer-to-dealer and dealer-to-client foreign-exchange platform
Digital: Cboe Digital, a regulated spot and futures platform for Bitcoin and Ether

The key economic engine is the Options and Futures segments, where CBOE holds a structural lock on SPX and VIX products. SPX options are the most actively traded index options contracts in the world; VIX futures are exclusive to CBOE's CFE exchange and cannot be replicated by a competitor without licensing the VIX methodology. Both products generate transaction fees, market data royalties, and index licensing revenue — recurring streams with minimal marginal cost per additional contract. 2

ROE deep-dive: three consecutive years above 18%

Fiscal year (ends Dec 31)	Net income	Year-end equity	ROE (period-end)	ROE (avg-equity)
FY2023	$761M 4	$3,985M 6	19.1%	20.44% 3
FY2024	$765M 4	$4,280M 6	17.9%	18.51% 3
FY2025	$1,100M 4	$5,138M 6	21.4%	23.36% 3
TTM (Mar 31, 2026)	$1,235M	$5,374M 6	23.0%	23.50% 3

FY2022 ROE was only 6.65%, an outlier caused by large non-cash amortization charges related to the EuroCCP/Bats acquisition. The three-year streak since FY2023 represents normalized operating performance. 3

The TTM ROE of 23.50% is CBOE's highest in more than five years — driven by FY2025 net income of $1,100M, up 43.9% from FY2024's $765M, as operating margins expanded from 26.8% to 31.1%. Compared to direct exchange peers, CBOE's ROE is below MarketAxess (24.3%) but exceeds CME Group (15.9%), Nasdaq Inc. (16.2%), and Tradeweb (14.2%). 7 8 9 10

Free cash flow: $2.7B TTM, FCF yield of 10.2%

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Period	Operating CF	CapEx	FCF	FCF margin
FY2023	$1,076M	$45M	$1,031M	27.3%
FY2024	$1,101M	$61M	$1,040M	25.4%
FY2025	$1,753M	$71M	$1,682M	35.7%
TTM (Mar 31, 2026)	$2,800M	$76M	$2,724M	56.9%

Source: 5

FCF accelerated sharply in FY2025 (+61.7% year-over-year) and continued expanding in TTM. The TTM FCF margin of 56.9% is unusually high even for an exchange operator — it reflects the low capital intensity of the business (CapEx was $76M on $4.8B in revenue) combined with strong operating leverage as volume on the SPX/VIX complex grew. At the current $26.65B market cap, TTM FCF of $2,724M yields 10.22% — well above the 10-year Treasury yield and dramatically above all exchange peers (CME: 4.73%, Nasdaq: 4.25%, Tradeweb: 4.89%, MSCI: 3.60%). 1

The P/FCF ratio of 9.78× is the lowest in the peer group by a wide margin (CME: 21.14×, Nasdaq: 23.50×, Tradeweb: 20.45×, MSCI: 27.80×). 1

Valuation: 32% below its own five-year average

P/E vs. historical range

Year	Trailing P/E
FY2021	26.50×
FY2022	57.29× (outlier — depressed EPS)
FY2023	25.04×
FY2024	27.10×
FY2025	24.09×
5-year simple avg	~32.0×
Current (Jun 17, 2026)	21.75×

Source: 3 1

The five-year average of ~32.0× includes the FY2022 outlier of 57.29×, driven by the single-year earnings trough. Excluding FY2022, the four-year average is approximately 25.7×. The current trailing P/E of 21.75× trades below both measures, meaning CBOE is cheaper relative to its own recent history on any reasonable baseline. The forward P/E drops to 18.55× — implying consensus expects further earnings growth over the next twelve months. 1

PEG ratio of 1.12× (based on consensus earnings growth estimates) is the lowest among comparable exchange peers: CME 2.83×, Nasdaq 1.59×, Tradeweb 1.54×, MSCI 2.14×. 1

P/E vs. exchange peers

Company	Trailing P/E	Forward P/E	EV/EBITDA	FCF yield	ROE
CME Group	21.55×	20.60×	19.35×	4.73%	15.9%
Nasdaq Inc.	25.09×	20.67×	17.44×	4.25%	16.2%
Tradeweb	24.88×	24.53×	—	4.89%	14.2%
MarketAxess	14.19×	14.71×	9.29×	—	24.3%
MSCI Inc.	34.16×	29.26×	26.14×	3.60%	—
CBOE	21.75×	18.55×	14.63×	10.22%	23.5%

Sources: 7 8 9 10 11

CBOE trades at a P/E discount to Nasdaq, Tradeweb, and MSCI, and roughly in line with CME Group — while generating more than twice the FCF yield of any of these peers. On EV/EBITDA, CBOE's 14.63× is roughly 20% below Nasdaq's 17.44× and 25% below CME's 19.35×. For a business with CBOE's FCF profile, that is a meaningful gap.

Analyst consensus: 17 analysts cover CBOE with a consensus Hold rating and an average price target of $326.93, representing +28.4% upside from the June 17 closing price. 2 Barclays upgraded to Overweight with a $302 target in December 2025. 2

Revenue and earnings: margin expansion across five years

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Period	Revenue	Growth	Net income	Diluted EPS	Op. margin
FY2021	$3,495M	—	$529M	$4.92	23.1%
FY2022	$3,959M	+13.3%	$235M	$2.19	12.4%
FY2023	$3,774M	-4.7%	$761M	$7.13	28.0%
FY2024	$4,095M	+8.5%	$765M	$7.21	26.8%
FY2025	$4,714M	+15.1%	$1,100M	$10.42	31.1%
TTM	$4,792M	+10.6% YoY	$1,235M	$11.71	33.8%

Source: 12

The FY2022 figures require the same contextual flag as in the ROE section: $235M net income that year was severely compressed by Bats-related non-cash charges, not by an operational deterioration. Strip that year out and the earnings trend is consistently upward, with gross margin expanding from 42.2% (FY2021) to 54.1% (TTM) as the mix shifted toward higher-margin derivatives and index data licensing. 12

Operating margin moved from 12.4% at the FY2022 trough to 33.8% TTM. At the same time, EPS nearly tripled from $7.13 (FY2023) to $11.71 (TTM). That combination — expanding margins + revenue growth — is exactly what produces the accelerating FCF picture in the section above.

Balance sheet: net cash positive with conservative leverage

Metric	TTM (Mar 31, 2026)
Cash & equivalents	$2,134M
Total debt	$1,558M
Net cash	+$612M (+$5.83/share)
Debt/Equity	0.29×
Long-term Debt/Equity	0.17×
Interest coverage	31.68×
Current ratio	1.39×
Retained earnings	$3,854M
Book value per share	$51.19
Tangible book value per share	$9.11

Source: 6 1

CBOE's net cash position improved from -$1,347M in FY2022 to +$612M in TTM — a $1.96B swing over four years. 6 Interest coverage of 31.68× means the business generates roughly $31 of operating earnings for every $1 of interest owed, leaving the debt load well within the bounds of what the operating cash flow can comfortably service. D/E of 0.29× is among the lower readings in the exchange sector.

The gap between book value per share ($51.19) and tangible book value per share ($9.11) reflects $3,142M in goodwill and $1,275M in intangible assets — a legacy of exchange acquisitions. 6 That is standard for exchange operators post-consolidation and does not affect the operating cash flow analysis above.

Competitive moat: VIX, SPX, and exchange network effects

CBOE's competitive position rests on three interlocking advantages:

Proprietary index franchise: The VIX index — formally the Cboe Volatility Index — is defined and owned by Cboe. VIX futures and options trade exclusively on CBOE's exchanges, which means every institutional hedge, every volatility arbitrage strategy, and every retail short-volatility product referencing VIX sends transaction fees to CBOE. The methodology can be licensed but not replicated on a competing exchange. SPX options are similarly concentrated: the S&P 500 index options market is, by traded notional and contract volume, the largest single-index options market in the world, and CBOE's share of SPX trading is near-total. 2

Exchange network effects: Liquidity begets liquidity. The tighter the bid-ask spread on CBOE's options markets, the more volume is attracted, which further tightens spreads. This self-reinforcing loop has made Cboe the default venue for professional options flow. A competitor would need to simultaneously attract market-makers and order flow to break the cycle — a coordination problem that has prevented any new entrant from challenging Cboe's index options dominance.

Regulatory licenses as a barrier: Exchange operating licenses in the U.S. and Europe are granted by the SEC, CFTC, and FCA respectively, are difficult to obtain, and take years to convert into a functioning venue. CBOE holds multiple — options, equities, futures, FX, and digital. These licenses represent access to regulated clearing, participant connectivity, and regulatory recognition that a non-registered platform cannot replicate.

Among the peers in the valuation table above, CBOE's closest structural rival is CME Group, which dominates U.S. futures in rates, equity indices, and commodities. The two companies compete at the margin in equity derivatives but occupy largely distinct product territory — CME owns the E-mini futures market; CBOE owns the options complex on top of the same indices. Nasdaq and ICE (via NYSE) are competitors in equities trading and listings but do not have equivalent positions in options or volatility products.

Risk factors

Risk 1 — Crypto perpetual futures: real competition or regulatory moat? On June 2, 2026, Kalshi and Coinbase received regulatory approval to offer crypto perpetual futures, triggering a -8.44% single-session drop in CBOE. 2 SpaceX launched perpetual futures on Kalshi with record demand the same week. The concern is that crypto-native platforms, freed from the constraints of traditional exchange regulation, will erode derivatives volume at incumbent venues. Barron's argued the fear is premature, citing the different regulatory frameworks and the distinct customer bases (institutional risk-managers vs. crypto-native retail). TD Cowen described the threat as "real risk"; RBC Capital Markets characterized it as "manageable." 2 The stock has not recovered the pre-June 2 level; the market is still pricing in uncertainty. Investors should monitor whether Kalshi's Bitcoin perpetuals gain market share in products that overlap with CBOE's existing options and futures volume — the overlap is currently limited but could expand.

Risk 2 — Workforce reduction execution risk. CBOE announced a 20% headcount cut (~330 employees) on May 1, 2026, alongside Q1 2026 earnings, framed as a strategic realignment to focus on core businesses. 2 The stock rose +8.95% on the announcement — the market read the cost discipline positively. The risk is execution: cuts of this magnitude can create service disruptions, technology delivery delays, or loss of institutional relationships if they remove key personnel. CBOE's Q2 and Q3 2026 results will show whether the restructuring improved margins or created friction.

Risk 3 — Very low insider ownership. Insiders (directors and executives) own only approximately 0.25% of shares outstanding. 1 Recent insider transactions in CBOE have skewed toward sales: Director Froetscher sold approximately $438K in shares in May 2026; SVP Wilkinson sold $72.6K in February 2026. 2 At 0.25%, management has limited financial exposure to the outcome of their decisions, which is a weak alignment signal. Institutional ownership is 90.77%, providing a different kind of oversight.

Risk 4 — International divestiture and strategic refocus. CBOE agreed to sell Cboe Australia and Cboe Canada to TMX Group in April 2026, exiting two international exchange businesses. 2 This is consistent with the workforce reduction — a narrowing of focus onto higher-margin, higher-moat businesses (SPX/VIX options, U.S. equities, Global FX). The risk is that the international footprint being sold limits future revenue diversification options, and that any future re-entry into those markets would require rebuilding relationships at greater cost.

Risk 5 — Revenue concentration in derivatives volumes. A sustained drop in equity market volatility (low VIX regime) reduces options trading activity and therefore transaction fees. CBOE's business performs best when implied volatility is elevated or when traders are actively hedging. 2 The offset is that CBOE has diversified its revenue toward recurring data and index licensing streams, which are less volume-sensitive. But the correlation between trading volumes and CBOE's top line has not disappeared.

Near-term catalysts

Q2 2026 earnings — estimated July 31, 2026, before market open. Q1 2026 was the quarter in which the May workforce reduction announcement landed. Q2 will show the first clean quarter without integration noise from that announcement. Watch for: (1) Options segment revenue growth — SPX options volumes have been strong in 2026 given elevated volatility; (2) whether adjusted operating margins expanded post-restructuring; and (3) any update on the Cboe Digital (crypto) segment as perpetual futures competition from Kalshi/Coinbase intensifies. 1

Dividend and shareholder returns. The annual dividend is $2.88 per share ($0.72 quarterly), yielding 1.13% at current prices. 1 CBOE has raised its dividend for 11 consecutive years, with the most recent increase of +14.3% year-over-year — the payout ratio stands at just 24.6% of earnings (compared to PAYX's 74% FCF payout), leaving substantial room for continued raises even in a scenario where earnings growth slows. Buyback yield is modest at 0.17%. 1

Strategic product launches with volume potential:

SEC approved extended trading hours for multi-listed single-stock options — May 2026 2
Filed proposal for near 24×5 U.S. equities trading — March 2026 2
Launched BITVX volatility index based on iShares Bitcoin Trust (IBIT) options — March 2026 2
Launched daily expirations for Dow Jones Industrial Average Index options — May 2026 2
Began near 24-hour trading in Russell 2000 Index options — February 2026 2

Each of these extends trading hours or adds new contracts that generate incremental transaction fee revenue with near-zero marginal cost.

Stock is technically oversold. The RSI (14-day) stood at 27.62 as of June 17, 2026 — below the conventional 30-level threshold that signals an oversold condition. 2 The stock is -31.4% below its 52-week high of $371.18, driven by the perpetual futures selloff in early June. The 17-analyst consensus price target of $326.93 implies +28.4% upside from the current level. 1

Decision framework

This is not a buy or sell recommendation. What CBOE presents is an exchange franchise with an irreplaceable index options position, trading at the lowest P/E in over five years, after a -31% drawdown driven partly by a competitive threat whose actual revenue impact on CBOE has not yet materialized.

The bull case requires: (1) the Kalshi/Coinbase perpetual futures approval does not meaningfully cannibalize SPX/VIX options volume — the products serve different users (institutional equity hedgers vs. crypto-native retail), which makes direct substitution limited; (2) restructuring costs prove temporary while the workforce reduction improves operating margins toward the mid-30% range; (3) new product launches (BITVX, 24×5 equities, extended hours single-stock options) generate enough incremental volume to offset any Cboe Digital headwinds. A reversion to the four-year average P/E (excluding the 2022 outlier) of ~25.7× on TTM EPS of $11.71 implies a stock around $301 — roughly +18% from today's level. A reversion to the full five-year average of ~32× implies approximately $374.

The bear case requires: crypto perpetual futures gain traction with the same institutional user base that trades SPX and VIX derivatives; the workforce reduction creates operational friction that slows product launches; and low-VIX market conditions reduce options trading volumes enough to reverse the margin expansion trend. In that scenario, the premium FCF yield compresses, and the relative valuation discount to peers does not narrow.

The variable separating the two scenarios is volume. Investors watching Q2 2026 earnings on July 31 should focus specifically on Options segment net revenue growth, contract volumes in SPX and VIX products, and any explicit guidance on the competitive response to Kalshi/Coinbase — those three items will show whether the June 2026 selloff was repricing justified by a structural threat or a fear-driven overshoot in a franchise with a 50-year-old regulatory moat.

Short interest of 2.44% of float is low and not a structural headwind — at 2.87 days to cover, a positive volume print would not face significant short-squeeze resistance. 1

This article is for informational purposes only and does not constitute investment advice. All data sourced as cited; financial figures are as of the dates noted.