Shares of

CBOE HoldingsCBOE -0.9157320712007408%CBOE Holdings Inc.U.S.: NasdaqUSD96.3
-0.89-0.9157320712007408%

/Date(1503090000270-0500)/

Volume (Delayed 15m)
:
1208870
AFTER HOURSUSD96.06
-0.24-0.24922118380062305%

Volume (Delayed 15m)
:
53506

P/E Ratio
53.20441988950276
Market Cap
10960796946.8585


Dividend Yield
1.1214953271028036%
Rev. per Employee
2380560
More quote details and news »

were around $93 early last month, the last time they appeared in this column.

Back then, we recommended purchasing the stock (ticker: CBOE) to profit from volatility trading without wading into the complexities of derivatives on the CBOE Volatility Index, or VIX. Our advice to sell CBOE August $90 put options for $2.54 to profit from an expected advance worked well. The put was basically worthless when it expired on Friday.

Since July 5, when we made the recommendation, much has happened to merit resetting the trade. The stock has risen another 4% or so—it was bouncing above and below $97 late last week—and the company has raised its quarterly dividend 8%, to 27 cents a share. Most dramatically, the VIX, which trades only at

CBOE HoldingsCBOE -0.9157320712007408%CBOE Holdings Inc.U.S.: NasdaqUSD96.3
-0.89-0.9157320712007408%

/Date(1503090000270-0500)/

Volume (Delayed 15m)
:
1208870
AFTER HOURSUSD96.06
-0.24-0.24922118380062305%

Volume (Delayed 15m)
:
53506

P/E Ratio
53.20441988950276
Market Cap
10960796946.8585


Dividend Yield
1.1214953271028036%
Rev. per Employee
2380560
More quote details and news »

’ Chicago Board Options Exchange, has finally begun exhibiting extraordinary volatility.

CBOE SHARES ARE, for the first time, within striking distance of $100. By year’s end they should cross that threshold, as more investors realize that the exchange is a well-run enterprise that offers investors a simple way to profit from the growing fascination with the VIX, and the rise of volatility as an asset class like stocks and bonds.

The exchange exclusively lists and trades VIX options and futures, which are used by investors all over the world to hedge or trade anticipated sharp moves in the Standard & Poor’s 500 index.

Even now, as the global market increasingly recognizes the paradoxical dangers of low volatility, upside VIX positioning remains brisk as investors try catching the volatility measure’s next big move.

Early this month, the VIX rose about 50% in a week. On Aug. 10 alone, it jumped about 33%, while setting a single-day volume record for futures and options. That surge, and the growing feeling among investors that the index might spike again, should help push CBOE shares into the triple digits before the company’s next earnings report.

If the VIX ultimately returns to its long-term average around 19, CBOE will profit from massive trading volume. In many ways, owning its stock is the easiest way to wager that volatility ultimately will snap back to normalized levels.

SINCE THE COMPANY’S 2010 initial public offering, we have repeatedly recommended selling CBOE puts and buying the shares. Many of our trade recommendations were made when the stock was near a record high, as it is again.

This time, investors should purchase CBOE calls and sell puts with a lower strike price, but with the same expiration date. This would position them both to buy stock on a decline and to participate in any rallies. With the shares at their recent quote of $97.43, consider selling the December $95 put for $2.60 and buying the December $97.50 call for $3.50. At $105, the call is worth $7.50. Below $95, investors get to buy stock.

The December expiration covers the seasonally volatile trading months of September and October, and CBOE’s expected Nov. 12 earnings release. The company’s CEO, Ed Tilly, also speaks at a

BarclaysBCS 0.2994011976047904%Barclays PLC ADRU.S.: NYSEUSD10.05
0.030.2994011976047904%

/Date(1503090157809-0500)/

Volume (Delayed 15m)
:
1945035

P/E Ratio
N/A
Market Cap
43306243064.8913


Dividend Yield
2.0827064676616915%
Rev. per Employee
226045
More quote details and news »

investor conference on Sept. 12. All of those events should support the stock.

One risk is that CBOE is no longer essentially a pure play on proprietary products such as VIX options and futures. Its September 2016 purchase of Bats Global Markets added a big stock business to the franchise, which could create turbulence around earnings.

But CBOE Holdings’ management is most likely mindful of that concern, and it will keep controlling costs to manage earnings, so that nothing dilutes investors’ perception of the company as the house that volatility built.

STEVEN SEARS is the author of The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails.

Comments: steve.sears@barrons.com

Follow: @sm_sears

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