Increasing market risk is driving demand for 'hedge' trades, and CME is loving it

By Tomi Kilgore

CME's stock suffers from high expectations, as the options marketplace reported record revenue that was just in line with forecasts

CME set a record daily trading activity, but the stock was set to fall as revenue was only in line with high investor expectations.

CME Group is breaking records for trading activity, as the options marketplace has been a major beneficiary of demand for investment protection during increasing uncertainty and market risk.

CME (CME), the parent of the Chicago Mercantile Exchange, set new records for quarterly revenue, average daily trading volume for all asset classes and clearing and transaction fees. Given all the market volatility during the first quarter, resulting from the selloff in technology stocks related to AI disruption, and the whiplash trading of multiple asset classes - such as equity, oil and interest-rate markets - due to the fluidity of the Iran conflict, hedging became the name of the game for investors.

"In a world in which risk had become the new normal, 2026 is off to a record-breaking start," CEO Terry Duffy said, as clients used derivatives "to hedge across asset classes and in all trading environments."

The average close for the Cboe Volatility Index VIX - known as Wall Street's "fear gauge" - during the first quarter was 20.44, based on FactSet data, which is above the long-term average of 19.4, according to DataTrek analysts. In March alone, the average VIX close was 25.6.

Hedging refers to when investors look for ways to protect their market positions from volatile movements without selling those positions. Options and other derivative instruments, such as futures, are often used like insurance policies, as they can reduce potential losses on core positions by providing some gains if the market moves against them.

The problem for CME's stock, however, is that Wall Street was anticipating an exceptional first-quarter earnings report, so estimates for profit and revenue had climbed during the quarter.

Raymond James analyst Patrick O'Shaughnessy wrote in a note before earnings were released that "recent geopolitical events have reinforced CME's role as a beneficiary of market volatility, and our forward estimates move higher."

The shares shed 0.6% in recent morning trading Wednesday toward a three-month low. That put them on track for a seventh straight loss, in which they have dropped 6%.

First-quarter revenue grew 14.5% from a year ago to a record $1.88 billion, just above the average analyst estimate compiled by FactSet of $1.87 billion. That average estimate had climbed from $1.67 billion at the start of the quarter.

Average daily volume jumped 22% to a record 36.2 million contracts, with records reached in all six asset classes.

Net income rose 20.7% to $1.15 billion, while adjusted earnings per share of $3.36 topped the FactSet consensus of $3.34. At the beginning of the quarter, the EPS consensus was just $2.91.

CME's stock has gained 3.6% so far this year, while the S&P 500 index SPX has advanced 3.9%.

-Tomi Kilgore

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04-22-26 0956ET