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Bond Insurer Bailout

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The market reversed triple digit losses on reports of an Ambac bailout plan. What’s the trade?

Bankers working on the deal to bailout troubled bond insurer Ambac (ABK) say progress is being made on a recapitalization plan that could save the bond insurer's triple-A rating, CNBC's Charlie Gasparino has learned.

The consortium of banks, which includes Citigroup (C) and Wachovia (WB) could announce the deal as early as Monday or Tuesday. Although the structure of the deal is still uncertain, sources indicated the deal could include both equity infusions and lines of credit.

To be sure the entire deal could fall apart; bankers have gotten close in the past. Nevertheless sources close to the negotiations between the banks and the New York State insurance department say significant progress is being made on a potential deal.

Is there a trade here?

If the deal comes to pass it would make me somewhat bullish on the market, overall says Karen Finerman. Also, I’m not sure I would remain short Lehman (LEH).

The market could jump 300 points, adds Guy Adami, if the deal does happen.

Just sell the rip, counsels Jeff Macke.

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Trader disclosure: On Feb. 22, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Macke Owns (DIS), (YHOO); Seymour Owns (AAPL), (INTC), (MER), (S), (TSO); Seygem Asset Management Owns (GFA); Finerman Owns (GS); Finerman's Firm And Finerman Own (KALU); Finerman's Firm Owns (MPG), (MSFT), (TSO), (VLO), (WMT), (YHOO), (AAPL), (GE), (JCP), (KSS); Finerman's Firm Is Short (IYR), (IWM), (IJR), (MDY), (SPY), (GFI), (LEH); Finerman's Firm And Finerman Own (HD) And (HD) Puts; Finerman's Firm And Finerman Own (CROX) And (CROX) Options; NBC Universal Is The Parent Company Of CNBC