With major U.S. indices up double digits YTD and valuations sitting in rarified territory, many investors are wondering how to stay invested without feeling overexposed if sentiment turns. That is where volatility and downside-hedging product providers can matter. This article looks at 3 stocks that are closely tied to options and derivatives, and explains how their link to this news backdrop might influence their appeal today.

The three stocks below are a starting sample, and the full screen on Simply Wall St surfaced 13 more companies tied to volatility and downside-hedging themes that also have compelling narratives. To see the wider field and identify which of these could fit your own playbook, head straight into the Volatility and Downside-Hedging Products Providers screener.

Saudi Tadawul Group Holding (SASE:1111)

Overview: Saudi Tadawul Group Holding runs the main stock exchange infrastructure in Saudi Arabia, handling securities trading, listings, clearing and settlement, and the depository and registration of securities, as well as selling market data, indices and financial technology solutions to investors and other market participants.

Operations: The company generates most of its roughly SAR 1.23b in revenue from Post Trade services at about SAR 622 million, with the rest coming from Capital Markets at about SAR 346 million and Data and Technology Services at about SAR 263 million, all within the Kingdom of Saudi Arabia.

Market Cap: SAR 13.9b

Saudi Tadawul Group Holding sits at the heart of Saudi Arabia’s capital markets, which can make it interesting if you are looking for businesses tied to trading, risk management and derivatives activity while U.S. valuations look stretched. Analysts currently expect faster earnings and revenue growth than the wider Saudi market, and the company earns healthy profit margins, although these have come down recently and earnings have been declining over the past 5 years. The stock trades on a premium P/E multiple and relies on higher risk external borrowing rather than customer deposits, so you are not getting a bargain or a low risk balance sheet. For investors, the key question is whether the exchange’s core role and growth outlook justify paying up for that position.

Saudi Tadawul Group Holding’s core exchange role, premium P/E and analyst growth expectations make the next move all about whether earnings can catch up to the price tag. Get the analyst forecasts for Saudi Tadawul Group Holding to see what the market might be missing.

Build your own volatility and hedging shortlist

Saudi Tadawul Group Holding and the other two stocks in this article all surfaced from a single screener, and you can apply the same process to your own ideas. Use our customisable Screener to mix metrics like valuation, growth, balance sheet strength, risks and dividends, or tap into our curated Investing Ideas for ready made starting points.

Central Depository Services (India) (NSEI:CDSL)

Overview: Central Depository Services (India) runs a core piece of India’s market plumbing, holding investors’ securities in electronic form and handling processes such as dematerialisation, transfers, pledges and e-voting. It also provides digital KYC, e-insurance, e-locker and other record keeping services for a wide range of financial assets.

Operations: Central Depository Services (India) generates most of its roughly ₹9,605 million in revenue from Depository Activity, with around ₹1,828 million from Data Entry and Storage and a small contribution from Repository services, almost all earned in India.

Market Cap: ₹281.0b

Central Depository Services (India) can interest investors who want exposure to rising trading activity and the steady shift of Indian savings into formal markets, without taking on direct trading or brokerage risk. Its core depository and KYC platforms support account based and transaction based fees that can benefit when volatility lifts turnover. Newer services in e-voting and e-insurance add extra income streams. At the same time, investors face a rich P/E, fee caps set by regulators, higher ongoing technology costs and margin pressure, so expectations are already high. For investors, the key question is whether this mix of growth drivers and regulatory and cost risks still stacks up in a world where quality market infrastructure is in focus.

Central Depository Services (India) operates at the intersection of rising Indian market activity, regulatory fee caps, and growing technology costs, so expectations already run high. Read the analyst forecasts for Central Depository Services (India) to see what could still surprise investors.

BSE (NSEI:BSE)

Overview: BSE Limited runs one of India’s main stock exchanges, offering trading in equities, currencies, debt, derivatives, mutual funds and other securities, as well as services such as clearing and settlement, data and index products, depository and repository solutions, SME listings, insurance broking and an electronic agricultural commodity platform.

Operations: BSE generates its roughly ₹57,884 million in revenue primarily from facilitating trading in securities and related ancillary services.

Market Cap: ₹1.41 trillion

BSE may appeal to investors looking for a focused position in higher trading and derivatives activity at a time when U.S. markets are viewed as having stretched valuations and investors are actively looking at volatility tools. Earnings growth forecasts around 15% a year, high current and forecast returns on equity, and strong profit margins suggest a business with meaningful earnings power, supported by active derivatives trading and platforms such as StAR MF. However, the stock trades on a relatively high P/E and remains heavily exposed to equity derivatives, regulation and ongoing technology spending. If you think higher volatility and India’s deepening investor base continue to drive volumes, the key consideration is whether BSE’s premium price still offers an attractive risk-reward trade-off.

BSE’s earnings power, premium P/E and heavy equity derivatives exposure point to a story that may not fully line up with expectations yet. Read the analyst forecasts for BSE to see where the trajectory could surprise investors next.

Seeking Alternatives Before The Crowd Moves

Fresh ideas can move fast when momentum builds and attention flies elsewhere. Do not get caught watching while prices shift under the radar for now. Consider acting before others.

• Identify cash flow strength before it is widely followed by scanning the 258 high quality undervalued stocks to see which businesses currently pair earnings quality with compressed expectations.
• Follow structural demand in critical materials by tracking the 28 best rare earth metal stocks and focus on producers positioned for supply tightness while it still matters.
• Explore stable compounding potential with the 303 resilient stocks with low risk scores and filter for companies where measured risk scores may help if broader markets start dropping.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.