Cboe Global Markets Inc (CBOE)

Investment Committee Summary

Investment Thesis

At $308 (25 August 2026) Cboe trades on roughly 24x forward earnings for a franchise whose economics are genuinely good: the proprietary SPX and VIX complex, recurring data and access revenue, an operating margin of 33% and net cash of ~$0.6B behind it. The engine does not dispute the earnings; it disputes the price. Probability-weighted value across the scenario tree is $235, the twelve-month target $239, and the blended anchor $241 — a gap of -22% that leaves the shares trading rich to the anchor set and produces SELL. The bulk of the simulated variance sits in the multiple rather than the earnings line, so the argument is about what the market will pay, not what Cboe will earn. Capital-light cash conversion supports the cash-flow read and is the strongest part of the bull case. One caveat belongs in the open: the simulation's probability of finishing above the current price is low enough that the bear weighting itself deserves scrutiny before the rating is sized. The most damaging risk is structural — volume and subscription erosion, whose scenario target sits below the 52-week low.

Narrative drafted 2026-08-16 by claude-opus-5 under supervision; reviewed by Marinus 2026-08-16.

The dashboard below is the whole argument on one page: spot ($308) against each valuation anchor, the scenario tree, technicals and the options-implied move.

Anti-Thesis (The Real Bear Case)

The structural bear does not require a market crash; it requires the recent volume regime to prove cyclical. Zero-dated index options and retail-driven hedging have inflated the transaction base. If daily volumes mean-revert while rival venues contest order flow, transaction revenue shrinks against a largely fixed cost base, so decremental margins are heavy and an operating margin of 33% falls faster than revenue does. At the same time, regulatory pressure on market-data and access fees caps the recurring line that justifies the data-and-analytics framing. Earnings fall and the market re-prices the shares from a compounder multiple toward what it pays for a cyclical toll booth — a de-rate from 24x rather than a modest trim. Those two moves compound, which is why the structural target sits below the 52-week low. Neither margin discipline nor buybacks offset a shrinking volume base once the recurring-revenue narrative breaks.

Key Debate

P/E Multiple explains 81% of Monte Carlo outcome variance — i.e. value is set by the multiple the market will pay, a rate/sentiment regime bet as much as an earnings bet.

What the Market Is Pricing In

At the current price, the market pays 21.7× consensus forward EPS, vs the house DCF terminal 16.0×, and a peer median 19.3×. The house DCF sits 16% below spot, so the market is pricing in more than the house case — roughly 2.0pp of revenue CAGR.

Variant perception: the house view is below-consensus, and the thesis is primarily growth-driven.

Scenario Analysis

The scenario tree spans a structural 'Structural — Volume / Subscription Decline / Competition' downside ($104) to a 'Bull — Re-Rate' bull case ($411); the probability-weighted blend (PWEV $235) is -24% versus spot.

Share-count charge: none applied. The probability-weighted value above is the gross per-share figure — no annual dilution is deducted — stock-based compensation runs at 1.0% of revenue; free cash flow net of SBC is $1.10B. SBC is therefore disclosed, not charged: read the per-share figures as before dilution.

Scenario rationale — the driver path behind every target:

• Structural — Volume / Subscription Decline / Competition (20%, $104). Structural impairment — volume / subscription decline / competition: earnings AND the multiple compress together. Target sits below the 52-week low by construction.
• Market-Activity Recession (17%, $176). Cyclical downturn — trading volumes + recurring data/index/ratings subscriptions + pricing power weakens for 1–2 years before normalising.
• Base — Recurring Data + Volume Growth (35%, $249). Mid-cycle — normalised trading volumes + recurring data/index/ratings subscriptions + pricing power; disciplined capital allocation; steady returns.
• Growth — New Data / Index / Analytics (20%, $322). Upside — new data / index / analytics lifts earnings above mid-cycle; the multiple expands modestly.
• Bull — Re-Rate (8%, $411). Upside tail — sustained tight conditions or a structural re-rate on new data / index / analytics.

Valuation Triangulation

Three weighted anchors — an intrinsic dcf, a scenario-weighted pwev and a monte carlo median (student-t + regime switching) — read them with their basis in mind. The Monte Carlo, the DCF terminal and any peer re-rate key off a market multiple, so they are not fully independent; only discounted cash flows themselves are genuinely multiple-free. The discipline is to read the spread and weight the cash-based view, not to treat three numbers as three independent votes.

The house blend DECLARES five anchor weights — DCF 35%, scenario PWEV 25%, Monte Carlo 15%, sum-of-parts 15%, peer re-rate 10%. For this name sum-of-parts, peer P/E re-rate are not computed, so 25% of the declared weight is redistributed across the anchors that exist — which is why the weights above differ from the declared ones. The fair value is unaffected by this disclosure; the blend has always worked this way.

Peer EV/Revenue re-rate — 0% weight: it duplicates the peer-multiple information already carried by the Peer P/E anchor while ignoring margin mix; weighting both would double-count the peer view. Shown as a cross-check.

Monte Carlo — the outcome distribution

10,000 paths, Student-t shocks (fat tails) with a regime-switching overlay. The median lands at $214 and 16% of paths finish above spot. The variance decomposition shows the p/e multiple is the dominant swing factor (81% of variance). Value is a multiple bet: fundamentals move the answer far less than the rating does.

DCF — the cash-flow anchor

Independent of the market multiple: a 5-year path, WACC 8.5%, 16.0x terminal FCF multiple → $257. This anchor is deliberately the heaviest (47%): it is the valuation least hostage to the current multiple regime.

Peer benchmarking — relative value

Against the peer cohort, re-rating to the peer-median EV/Revenue multiple implies $424; the peer-median forward P/E is 19.3x, but the engine carries no P/E-implied price for this name (no forward-EPS basis at the peer step). A premium is only justified by superior growth/margins; otherwise it is multiple risk. Excluded from the weighted blend — shown only as a market cross-check.

Across all anchors the spread is 82% of the median — wide (genuine disagreement — the blend carries low valuation confidence).

Sensitivity

DCF/share — WACC × terminal multiple

DCF/share — revenue CAGR Δ × op-margin Δ

Tornado — DCF/share swing by driver (widest first)

Company lever — SoP/share vs Exchanges, Ratings & Market Data multiple (AI re-rating) (base 19.0x)

Peer Quality & Weighting

Quality-weighted forward P/E: 21.2× (simple median 19.3×). Direct peers count 100%, segment 50%, broad 25%.

Historical-range cross-check: 52-week range $225–$370, centre $289 (-6% vs spot); spot sits at the 57th percentile of the range. Low-weight mean-reversion cross-check, not a fundamental anchor.

Risk / Reward & Margin of Safety

That ratio compares triangulated upside against the probability-weighted bear target, not the extreme tail; with a leg missing it is withheld rather than computed from a magnitude. Bull case (Bull — Re-Rate): $411.

Company Overview & Business Model

Cboe Global Markets Inc — FINANCIAL SERVICES · FINANCIAL DATA & STOCK EXCHANGES. Cboe Global Markets is an American company that owns the Chicago Board Options Exchange and the stock exchange operator BATS Global Markets.

How it makes money.

Edge. Wide moat — The moat is the proprietary SPX/VIX index-options franchise (exclusive licensing, liquidity network effects, settlement primacy) plus recurring data/access revenue - a genuine toll-road; at ~19.3x forward, in line with the exchange peer 19.3x, the market prices no franchise premium, so the moat supports HOLDING the terminal multiple at ~19x rather than compressing - but if daily volumes prove cyclical and mean-revert, the transaction-heavy earnings base falls and the multiple should compress toward the low-cyclicality peer discount.

Revenue-Segment Breakdown

The company-specific drivers behind the valuation — each segment carries its own growth, margin, multiple and capex intensity. (Tags: FACT reported · ESTIMATE from disclosures · INFERENCE judgment.)

Named Exposures

Demand & pricing cycle (FACT/ESTIMATE)

Capital intensity & shareholder returns (ESTIMATE)

Structural risk vs optionality (INFERENCE)

Balance Sheet & Liquidity

Balance-sheet data as of 2025-12-31 (Alpha Vantage).

Capital Allocation

Free-Cash-Flow Quality

Accounting quality: SBC 1% of revenue; cash conversion (OCF/NI) 112% — cash-backed.

Competitive Moat

Moat sources:

• Exclusive SPX/VIX index-options licensing and settlement franchise (the durable network-effect moat)
• Recurring market-data, index-licensing and access/connectivity subscription revenue
• Liquidity network effects concentrating options order flow
• PARTIAL: multi-listed equity-options and one-day-settled products face genuine venue competition and fee pressure

Earnings-Call Disconfirmation & Sentiment

Derived signals from the MCH market-data store (Alpha Vantage transcripts + news). Quantitative tone only — a disconfirmation flag, not a substitute for reading the call.

Management vs analyst tone (2026Q2): management +0.44 vs analyst floor +0.00 → delta +0.44 (n=22 mgmt / 19 Q&A; 57th pctile across the S&P book, z +0.2).

Flag: TYPICAL — management-vs-analyst tone within the normal cross-sectional range.

News (last 365d, 2114 articles): avg ticker sentiment +0.14 (bullish 13% / bearish 2%)

Consensus & Market Expectations

_Consensus figures: Alpha Vantage sell-side aggregates. Where the house view sits materially above or below the street, the divergence is itself a datum — see the thesis.

Catalyst Calendar

• 2026-10-15 (~52d) — Investor Day / recurring-revenue (Data Vantage) mix and margin targets (authored)
• 2027-01-15 (~144d) — New product / index-and-analytics launch cadence (0-DTE, credit, crypto-derivatives) (authored)

Forecast Track Record

• EPS surprise: beat 88% of the last 8 quarters; average surprise +3.5%.
• Prior-forecast backtest (12 snapshots, 2026-06-27→2026-08-20): directional hit-rate 8%; mean predicted -15.0% vs realised +9.3%. Disconfirming track record is reported, not suppressed.

Catalyst Timeline

6 catalysts in the next 90 days (of 15 tracked). Importance 1–3; confidence 0–1.

_Sources: extended.catalysts, data/catalysts/.json, data/catalysts/macro.json, AV DIVIDENDS, opex 3rd-Friday calc.

Regulatory & Legal Risk

Probabilities and sensitivities are analyst estimates, not market-implied.

Scenario Macro & Key Risks

Decision Rules (Machine-Checked)

Stance: Hold — 0 bullish / 1 bearish / 0 caution rules triggered of 6 evaluable (0 lacked data).

Machine-checked rules over disclosed inputs. The authored falsification triggers elsewhere in this report are analyst judgment and are NOT evaluated here. The stance is a portfolio-management signal and does not modify the published research rating.

Reasons the Thesis Could Fail (Falsifiable)

Pre-registered signals that would break the thesis — each polices a specific scenario boundary and is checked at every earnings update:

• Organic net revenue growth (YoY) < 0.04 (2 consecutive prints). (rationale withheld pending re-authoring — frozen figure or verdict)
• SPX index options average daily volume, YoY change < -0.05 (2 consecutive prints). (rationale withheld pending re-authoring — frozen figure or verdict)
• Data Vantage (data and access solutions) revenue growth (YoY) < 0.05 (2 consecutive prints). (rationale withheld pending re-authoring — frozen figure or verdict)
• Adjusted operating margin (model basis, on gross revenue) < 0.32 (2 consecutive prints). (rationale withheld pending re-authoring — frozen figure or verdict)
• Regulatory action capping proprietary market-data or index-licence fees (SEC rule adoption or binding fee suspension) = adopted (single event). A binding cap on market-data or licence fees converts the recurring pricing-power line into regulated revenue and validates the structural path irrespective of volumes.

Fact / Inference / Speculation

• FACT: Spot $308; 52-week range $225–$370; engine rating SELL; house target $239 (-22%). (source: Alpha Vantage 2026-08-24, 25 August 2026)
• INFERENCE: Triangulated FV $241 (-22% vs spot · triangulated FV); the rating tracks the Monte-Carlo + scenario-PWEV core; the cash-flow anchor sits above the multiple-discipline core.
• SPECULATION: At current prices the embedded bet is that the market keeps paying the current multiple through the capex cycle — a regime call the engine cannot verify from fundamentals alone.

Conviction Score

Research Conviction measures the strength and quality of the research setup — input coverage, financial quality, valuation support, process agreement. It is NOT the probability that the recommendation succeeds; the forecast track record section is the evidence on that.

71.0/100 (confidence band 57.5–84.5), 94th percentile of 858 covered names (as of 2026-08-24). Weighted composite under config ros-1.19.0 — every component and its inputs below.

Missing inputs (macro tailwinds) are excluded and the remaining weights renormalised; the confidence band widens accordingly.

Score history: 71.3 → 71.3 → 71.3 → 71.4 → 71.4 → 70.8 → 70.9 → 70.9.

Probability-Weighted Return Profile

Horizon: 1 year — at this horizon CAGR equals total return by definition. Expected values are the probability-weighted sums over the full scenario set below.

The gross expected return is the probability-weighted scenario return (it reconciles to the gross PWEV); the diluted figure applies the SBC share-count charge and matches the published PWEV-based target.

Expected Alpha

Expected return minus the return this name is REQUIRED to deliver for its risk (1-year horizon). Constants are pre-registered (preregistered-static (amendment #2, 2026-07-29); not fitted to MCH outcomes).

A negative expected alpha does not change the rating — it says the expected return does not clear the risk-adjusted hurdle at today's price. Rating mechanics are unchanged by this section.

Probability Cross-Checks

Not authoritative. The scenario probabilities in this report are AUTHORED — a judgement about how the world might go, not a measurement. Nothing below modifies them, the target, the rating or any position size. These checks ask only whether anything outside our own model agrees with us; where it does not, that is information for the reader, not a correction we have quietly applied.

Authored set: 5 scenarios, probabilities summing to 1.0, mean target $235.08.

Factor Exposures

Cross-sectional percentiles over 858 covered names (style scores sector-demeaned; thematic = return-beta to the theme's proxy ETF). 50 = estate median.

Market interaction: correlation vs SPY -0.14, vs QQQ -0.18 (trailing ~1y daily returns).

Options Intelligence

Preferred structure: Protective Put. The selector reads the equity view (direction) and the volatility surface — nothing here re-prices the chain.

• bearish/holder — hedge the position; a collar finances the put by capping upside
• Direction bearish from the overlay conviction/rating (read-only input).
• IV/RV at the 40th percentile of the cross-section → mid vol bucket. This is the measure that selects the structure above: it ranks how rich this name's implied vol is against its own realised vol, relative to other names.
• Reported alongside and not used to select: this name's own ATM IV sits at the 75th percentile of its own month-end history (decile 8). The two measures disagree here — vol is high for this name by its own history while its options are not unusually rich against its realised vol. Where they diverge, the cross-sectional measure is the one acting.
• IV term structure is in contango (longer-dated richer, slope +1.9pp) — favour longer-dated ownership (LEAPS) or calendars that are long the cheaper front.

IV term structure (contango, slope +1.9pp): 32-DTE 34% · 116-DTE 36% · 297-DTE 36%

Economics copied verbatim from the options overlay (priced from the listed chain (EOD marks)); the selector does not re-price.

Alternatives: Collar, Put Debit Spread. IV rank shown via the name's own monthly IV history (advisory); structure selected on the cross-sectional IV/RV percentile. Model output for research and education only — not individualised investment advice. Position-sizing and stance figures are mechanical outputs of the disclosed rules and inputs; they do not consider any person's objectives, financial situation, or tax status.

Position Sizing Framework

research rating is SELL-tier — the model carries no long position.

Model output for research and education only — not individualised investment advice. Position-sizing and stance figures are mechanical outputs of the disclosed rules and inputs; they do not consider any person's objectives, financial situation, or tax status.

Options Overlay

A defined-risk way to express the SELL equity view. Chain as of 2026-08-24 — end-of-day marks — indicative, not executable quotes.

Market signals — ATM IV 33.7% (moderate regime) · expected move ±8.0% (2026-09-25) · put/call OI 0.57 · ATM Δ 0.51 / Θ -0.21 / ν 0.36. Direction: SHORT/HEDGE (implied return -21.7% to triangulated fair value $241.32).

Bear Put Spread (Bearish) — Long 310 P / Short 240 P · 2027-03-19 · net debit $22.8 · max profit $47.20 · breakeven $287.20 · RoR 207.0% · max loss $22.80 · priced from the listed chain (EOD marks)

Defined-risk downside expression: the debit caps the loss, with the position gaining as the stock falls toward the lower strike — a way to act on a bearish view without shorting stock. Illustrative — no outcome is implied or guaranteed.

Protective Put (if held) (Hedge) — Long 310 P · 2027-03-19 · premium $30.95 · floor 1.0% · max loss $30.95 · priced from the listed chain (EOD marks)

Insurance for an existing holding — a known premium buys a floor while leaving the upside intact. A way to hold through a binary event or volatility with defined downside.

Protective Collar (if held) (Hedge) — Long 280 P / Short 340 C · 2027-03-19 · net $3.8 · floor -9.0% · cap +10.0% · priced from the listed chain (EOD marks)

For a holder who wants to stay invested but cap risk: the sold call funds most of the protective put, fencing the position into a band — a way to ride out a de-rating without selling.

Indicative options structures — a defined-risk expression of the equity view, model-and-market illustrated from the last-close chain. NOT personalised advice or an executable quote; premiums, IV and greeks move intraday. Options carry the risk of total loss of premium. Not a registered financial adviser.

Rating Bridge

Rating = SELL because:

• Probability-weighted scenario value implies -24% vs spot
• Monte Carlo median implies -30% vs spot
• DCF fair value implies -16% vs spot
• Bear case (Structural — Volume / Subscription Decline / Competition) downside is -66% vs spot
• Net: the valuation anchor itself sits 21.7% below spot, so there is no reward leg to weigh against the bear case and the reward-to-risk ratio is withheld rather than computed off a negative upside. The rating warrants a Sell.

Model Appendix

DCF — line items

FCF is bridged: NOPAT + D&A − Capex − ΔNWC (capex intensity 3% of revenue, weighted from the segments) — not a single conversion fudge.

WACC 8.5% · Σ PV(FCF) $7B + PV(terminal) $20B = EV $27B; + net cash $0.6B → equity $28B ÷ diluted shares $0.11B = $257/share (exit-multiple terminal).

• Gordon terminal at 2.5% → $270/share — a genuinely non-multiple, cash-based cross-check; the exit-multiple and Gordon values bracket the terminal-value risk.
• Incremental ROIC on the forecast capex ≈ 112% vs WACC 8.5% → above WACC — the build is value-creative.

Peer set

Implied prices at the peer medians: EV/Rev → $424 (no P/E-implied price — no forward-EPS basis at the peer step).

Weighted fair-value math

Assumption Register

Sensitivity-ranked drivers (widest fair-value swing first): Revenue CAGR ±3pp (64.0); Terminal × ±15% (57.0); Op margin ±3pp (42.0); WACC ±1pp (21.0); Capex intensity ±15% (4.0).

Inputs, Sources & Confidence

Every load-bearing input, labelled by type and confidence. (reported fact · company guidance · consensus estimate · market data · house estimate · inference.)

Research Provenance

Load-Bearing Assumptions

DCF: WACC 8.5%, terminal multiple 16×, FY+5 revenue $7B. Triangulation leans 47% on DCF, 33% on PWEV, 20% on the Monte Carlo median.