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Washington Rock Stocks

Every time you turned around on Wall Street today, it seemed Washington was moving the market, specifically House Speaker Nancy Pelosi. Her comments sent homebuilders soaring and insurance stocks tumbling.

Homebuilders

Around midday the Homebuilders ETF shot higher after Pelosi revealed that Congress will consider extending the tax credit for first-time home buyers, currently set to expire Dec. 1.

Also a report in the New York Times suggested that in addition to first time homebuyers, the White House may also make it available to current homeowners who purchase a new house or condo.

What must you know?

Daniel Clifton, head of policy research at Strategas is optimistic - at least about an extension in its current form.

I’m noticing a big disconnect between Washignton and investors, he says. Most investors don’t think it will happen and most politicians do. Personally, I think we’ll see a 6-month extension. States that are hardest hit by housing woes such as Nevada have very powerful senators.

Insurance

Meanwhile, health insurance companies such as Aetna and UnitedHealth also made moves on Wednesday – sharp moves lower – again due to comments made by Nancy Pelosi.

The Speaker said she would send three different versions of her chamber's health-care bill to the CBO for analysis – and all three versions will include a government-sponsored insurance plan – or public option.

Also, Pelosi said Democrats are looking at the possibility of a windfall profits tax on insurance companies as part of healthcare reform.

What’s the trade?

It feels like the rhetoric is reaching a crescendo, says Karen Finerman, and that makes me think it’s a good time to take a shot. But I’d only do it with options so you know your downside risk. Personally, I got long out-of-the-money calls in Wellpoint, UNH and some others insurers.

I’m with Karen, adds Guy Adami. I think the negative rhetoric is a buying opportunity. Valuations are cheap.

I agree that’s a smart way to play, echoes Steve Grasso, but I also think insurance stocks moved earlier in the year on a belief that there was gridlock in Washington and reform wasn’t going to pass at all. That might not be the case.

I think what’s going on in the House is theatrics, says Daniel Clifton, Strategas head of policy research. I expect health care reform to look at lot more like the bill that’s coming out of the Senate. I really don’t expect to see a public plan. And I think once we see clarity the entire space can move higher.

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Trader disclosure: On October 8, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Owns (UNH) Calls; Finerman's Firm Owns (MSFT), (TGT); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm And Finerman Own (WMT); Finerman's Firm Is Short (USO), (IJR), (MDY), (SPY), (IWM), (UNG); Finerman's Firm Owns (BAC), (BAC) Call Spread, (BAC) Preferred; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (AET) Calls; Finerman's Firm Owns (WLP) Calls; Finerman's Firm Owns (RIG), Is Short (RIG) Calls; Finerman Owns (RIG); Pete Najarian Owns (BRCD) Calls; Pete Najarian Owns (C) Calls; Pete Najarian Owns (INTC), Is Short (INTC) Calls; Pete Najarian Owns (MYL) Calls; Pete Najarian Owns (STX) Calls; Pete Najarian Owns (WFC) Puts; Pete Najarian Owns (YHOO) Call Spread; Grasso Owns (AAPL), (ABK), (ASTM), (BAC), (C), (COST), (PRST), (V), (WMT), (FAZ)

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Stuart Frankel Corp. & Partners Are Short (QQQQ)
Stuart Frankel Corp. & Partners Are Short (CL)

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UNH
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WLP
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SPDR SP HB
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