Written By 2020 was an unprecedented year, and the markets were no exception. With a global pandemic bringing economies to their knees, investors found solace in volatile trading as a way to make back some of their losses. As a result, the Chicago Board Options Exchange (CBOE) witnessed record profits due to increased trading activity throughout the year. In this blog post, we’ll take a look at how this Chicago-based exchange managed to benefit from market volatility during such difficult times and what it means for investors going forward.
What is the Cboe Exchange?
The Cboe Exchange is a Chicago-based options exchange that offers trading in a wide variety of options contracts, including options on stocks, stock indexes, and exchange-traded funds (ETFs). The Cboe also offers trading in futures contracts and options on futures contracts.
The Cboe was founded in 1973 as the Chicago Board Options Exchange, or CBOE. It is the largest options exchange in the United States, with an annual trading volume of more than 1.6 million contracts. The Cboe is regulated by the Securities and Exchange Commission (SEC).
The Cboe offers two types of options: standard options and mini-options. Standard options are 100 shares of the underlying security, while mini-options are 10 shares of the underlying security. Options traded on the Cboe are either American-style or European-style. American-style options can be exercised at any time before expiration, while European-style options can only be exercised on the expiration date.
Options traded on the Cboe are subject to a transaction fee, which is paid by the buyer to the seller. The fee is $0.50 per contract for standard options and $0.25 per contract for mini-options.
What drives market volatility?
Market volatility is driven by a variety of factors, including economic indicators, political events, and natural disasters. When investors are unsure about the future, they tend to buy safe-haven assets like gold or government bonds. This demand for safe-haven assets drives up their prices, and in turn, increases market volatility.
Economic indicators can have a major impact on market volatility. For example, when the U.S. Federal Reserve raises interest rates, it typically leads to a rise in the value of the dollar. This makes other currencies less attractive to investors, and can cause a sell-off in global markets. Political events can also lead to market volatility. For instance, when Brexit negotiations stall or there is uncertainty about who will be the next U.S. president, investors may become worried and start selling off stocks. Natural disasters can also lead to market volatility as investors worry about the impact of the event on global economies. For example, when Hurricane Irma hit Florida in 2017, it caused a spike in oil prices as traders feared that the storm would disrupt production in the Gulf of Mexico
How did the Cboe Exchange benefit from market volatility in 2020?
Cboe’s profits were up in 2020 thanks in large part to increased market volatility. The exchange benefited from higher trading volumes and greater interest in derivatives products as investors sought to protect themselves from the volatile markets. Cboe also launched several new products that proved popular with traders, including options on bitcoin and ether.
Looking ahead, Cboe plans to capitalize on the current market conditions by launching even more new products and expanding its market share. The exchange is well-positioned to benefit from continued volatility in the markets, which is likely to boost profits even further in 2021.
What does the future hold for the Cboe Exchange?
The Cboe Exchange is the world’s largest options and futures exchange, and it’s clear that they’re not going anywhere anytime soon. In fact, with the current volatile market conditions, the Cboe Exchange is poised to see even more profits in the future.
With a presence in over 20 countries and growing, the Cboe Exchange is quickly becoming a global powerhouse. And with their recent acquisition of BATS Global Markets, they are now able to offer an even wider range of products and services to their clients.
There is no doubt that the Cboe Exchange will continue to be a major player in the financial world for years to come.
Conclusion
In conclusion, the CBOE Exchange in Chicago has seen a major surge of profits due to volatile market conditions this year. This is likely to continue as long as the markets remain unpredictable. Through innovative products and services offered by their trading platform, investors can take advantage of rapid price fluctuations and capitalize on short-term opportunities with ease. Ultimately, the Chicago Cboe exchange serves as an important hub for many investors looking to maximize their returns during these turbulent times.
