CBOE Cboe Global Markets
Index options moat earns real pricing power, but the price already reflects near-peak volumes and margins.
The story
Cboe is the dominant venue for U.S. index options (SPX, VIX), a proprietary-product franchise with network-effect liquidity and pricing power, plus more commoditized equities, FX, and futures businesses. Retail and 0DTE options volumes kept growing and TTM revenue reached 5.06B with operating margin at 38.4%. That margin is on gross revenue that includes pass-through cost of revenue, so the business looks like a mature cash generator rather than a hypergrowth story. Its growth runway comes from product innovation and international data and access, not from rising market share.
I nudged the target margin up from 34% to 37% because TTM margin reached 38.4% as proprietary index options grew as a share of the mix. I kept it below the peak because volume-driven margins mean-revert when volatility normalizes. I trimmed sales-to-capital from 0.9 to 0.85 to reflect TTM efficiency of 0.77. Growth, risk, and horizon are unchanged because the franchise story has not changed.
Value drivers
| Revenue growth (Y1) | 7.0% |
| Terminal growth | 3.5% |
| Forecast horizon | 7y |
| Target operating margin | 37.0% |
| Years to target margin | 5 |
| Sales-to-capital | 0.85 |
| Beta | 0.95 |
| Failure probability | 2.0% |
| Cost of capital (WACC) | 9.3% |
| Terminal WACC | 9.5% |
Valuation bridge
| PV of explicit FCFF | 6.35B |
| PV of terminal value | 13.39B |
| Equity value | 20.10B |
| ÷ shares → per share | $192.51 |
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 5.42B | 7.0% | 38.1% | 1.45B | 416.81M | 1.03B | 945.55M |
| 2 | 5.76B | 6.4% | 37.9% | 1.53B | 408.82M | 1.12B | 939.82M |
| 3 | 6.10B | 5.8% | 37.6% | 1.61B | 395.51M | 1.21B | 928.91M |
| 4 | 6.42B | 5.3% | 37.3% | 1.68B | 376.72M | 1.30B | 912.99M |
| 5 | 6.72B | 4.7% | 37.0% | 1.75B | 352.44M | 1.39B | 892.30M |
| 6 | 6.99B | 4.1% | 37.0% | 1.82B | 322.78M | 1.49B | 875.37M |
| 7 | 7.24B | 3.5% | 37.0% | 1.88B | 287.96M | 1.59B | 853.48M |
Key risks
- Options and 0DTE volumes normalize as volatility and retail activity cool, compressing transaction revenue
- Regulatory scrutiny of 0DTE trading, payment for order flow, or market data fees
- Competition from CME and new entrants in index and volatility products, plus fee pressure in commoditized equities
Catalysts
- Continued SPX/VIX volume growth and new product launches (expanded 0DTE, international access)
- Data and access revenue growth and capital returns from a net-cash balance sheet