First Republic, PacWest, and the broader regional bank ecosystem share a similarity: Options traders are pressing bets against them ahead of today’s Fed rate decision.
Cboe data shows that when First Republic Bank lost half its value in a single day last week, it was the fifth most active options contract. That doubled the previous high set in March, and nearly three-quarters of the trades were put options.
Puts are used to hedge or bet on falling prices by giving the right to sell a security at a certain price by a specified date.
PacWest saw consecutive record options days on Monday and Tuesday, also led by bets against its stock. Options activity linked to the Western alliance also hit a record high on Tuesday.
The SPDR S&P Regional Banking ETF (Ticker: KRE) saw the second highest daily options volume on Tuesday. More than three-quarters of the trades have been placed.