Interactive Brokers has a dominant position in the rapidly growing, albeit competitive global derivatives market. It has a growing electronic brokerage business as well. Electronic brokers, like E*Trade and Ameritrade tend to sell off when the overall market drops on the theory that trading by individual investors will slow down (as they get scared or otherwise lose all their trading money). But as a market maker for options, IBKR stands to do well, as increased market volatility should lead to increased options trading across the board.
I also think that IBKR lacks widespread institutional analyst coverage right now, but that this should change in the future. IBKR conducted its IPO through an auction, eschewing the traditional investment bank - underwritten approach. I think that the major IB's sell side analysts have not been covering the stock for this reason. However, over time, as the company continues to perform well, analyst interest should follow.
$25.45 (08/10/07)
