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Before I get into why the Chicago Board of Options Exchange (NASDAQ:CBOE) might be a good buy right now, let's go over exchanges and the industry CBOE participates in. In pretty much every business, there is always a "top dog" or top company, for better words. However, much of the time these companies will be replaced with a new "top dog". It's a cycle that repeats over and over in every sector. However, that is not necessarily the case in the exchange ownership business. For example, the New York Stock Exchange is almost guaranteed to remain the biggest exchange for stocks that aren't technology-related in the U.S. Also, the stock market (options, futures etc.) is the heart of capitalism, people need to trade there. Because of this, the exchange makes a commission on every trade executed. Therefore, the exchange will always have a steady income from trading.

Now looking at the CBOE, it is the largest options exchange in the U.S. and the world. It is most likely to stay that way because of the business that it is in. It is very unlikely that there will be an options exchange that will even come close to its size. Once again, it will have a steady income from trade execution because of the need to trade. People need to hedge their positions, and then there is the speculative aspect as well. The CBOE's financials are also quite good, as its net income has been increasing year after year.

If you look at the psychology of the general trading public, there will always be someone trading. The reason is because even when someone loses their shirt, they know that if they had taken the opposite side, they could have made a fortune. The luster of trading will keep speculators coming to the exchanges, keeping profits steady. Couple that with the CBOE being the 'top dog' of the options market, it is likely its share price will rise or outperform in the long term.

Disclosure: Long CBOE

Source: Why the Chicago Board of Options Exchange Is a Good Buy