Is fear of the Fed raising rates not priced in for bank stocks?

Wells Fargo's stock is currently trading at $37.90. Out-of-the-money puts on WFC near the current price are valued relatively low.

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U.S. equities are experiencing minimal fluctuations on Wednesday, as market participants are refrained from making substantial moves in anticipation of the FOMC announcement later today.

The Federal Reserve is expected to implement another 25 basis point rate increase, with the focus being on future policy direction, particularly the potential for a higher terminal rate or additional rate hikes this year.

First Republic Bank shares have declined almost 2.5%, following a 25% decrease in the previous week. Nonetheless, FRC rebounded nearly 50% from its one-week low, thanks to the financial support provided by various banks, including Bank of America, Wells Fargo, Citigroup, JP Morgan, and Goldman Sachs, with investments totaling $27.5 billion.

The steep decline has left investors concerned about which institution might be the next to face challenges. If the Fed chooses to raise rates despite the ongoing turmoil in the financial sector, FRC's stock price could sink to new lows, and the banks that offered support may be exposed to risks.

Wells Fargo's stock is currently trading at $37.90. Out-of-the-money puts on WFC near the current price are valued relatively low. However, following the FOMC announcement, market momentum is expected to shift downward, offering a hedge against potential instability in the financial industry.

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