Cboe Global Markets is Monday's IBD Stock Of The Day as the trading exchange operator stands to benefit from increased volatility ahead of the 2024 election. Cboe stock, which is rallying off key support, is within just 1% of an early entry.
With Q3 reporting dates approaching for exchanges, analysts have leaned into their bullish commentary, saying results should benefit from strong trading activity induced by higher equity market volatility. Further, Piper Sandler said the group should continue benefiting from persistent volatility around the 2024 election. Piper Sandler hiked its Cboe price target to 220 from 210 on Oct. 8, and kept its outperform rating.
Active Trading In Q3
Cboe posted record average daily volume of 4.23 million contracts in Q3 for its proprietary index options, the firm said on Oct. 3. That includes the second-best daily volume of 980,000 contracts for its Cboe Volatility Index options, which are used to hedge S&P 500 risk.
Cboe posts Q3 results on Nov. 1. CME Group reports on Wednesday, Nasdaq on Thursday, and Intercontinental Exchange on Oct. 31.
Cboe's SPX index options are the mostly actively traded index options in the U.S., providing exposure to the large-cap index as well as options for managing risk.
Oppenheimer raised its Cboe price target to 227 from 209 on Oct. 14, keeping an outperform rating. The firm highlighted its new focus of putting buybacks ahead of acquisitions, while stabilizing margins and reaching for growth among overseas investors.
Volatility Fuels Cboe, Exchange Stocks
Volatility soared at the start of August when the jobs report for July came in unexpectedly soft, stoking recession fears. That coincided with an Aug. 2 breakout for Cboe stock from a cup-with-handle base.
More solid jobs data since then has calmed markets, but several factors could conspire to shake things up. Any further hints that inflation is sticking around could jolt markets and the Federal Reserve's rate-cut outlook. More direct military exchanges between Israel and Iran remain a risk. Plus, the VIX index rose sharply in the period just before Election Day in 2016 and 2024, and a repeat wouldn't be a surprise.
Strategists at Morgan Stanley Wealth Management wrote last week that the 2024 election "may be particularly volatile, given the potential for delayed election results as well as macroeconomic and geopolitical concerns."
"Given tight polling margins in swing states, our base case is that an election delay could last days or even weeks," they wrote.
The 2020 election saw the VIX spike 40%.
Cboe Stock Action
Cboe stock rose 1.3% to 211.99 on Monday, following a Friday test of its 50-day moving average. A move past last week's high of 213.05 would offer an early entry opportunity.
Shares have a traditional 216.14 buy point from an eight-week flat base. The latest base is just above a prior consolidation, forging a bullish base-on-base pattern that is clear in a weekly MarketSurge chart.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
