Filed under: Major movement, Deals, Good news, Options, Technical Analysis

O’Reilly Automotive Inc. (NASDAQ: ORLY) shares are trading higher today the company said it will acquire CSK Auto Corp. (NYSE: CAO) for $500 million in a cash and stock deal. The combined company will be the third-largest U.S. auto parts retailer. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ORLY.

After hitting a one-year high of $38.84 last April, the stock hit a one-year low of $24.08 in January. ORLY opened this morning at $29.45. So far today the stock has hit a low of $29.18 and a high of $30.50. As of 12:20, ORLY is trading at $29.94, up $1.42 (5.0%). The chart for ORLY looks bullish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.

For a bullish hedged play on this stock, I would think about an August bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the buy and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we’ll make an 8.7% return in just 5 months as long as ORLY is above $25 at August expiration. O’Reilly would have to fall by more than 16% before we would start to lose money. Learn more about this type of trade here.

ORLY hasn’t been below $25 for more than a few days in the past year and has shown support around $28 recently. This trade could be risky if the company’s earnings (due out in late April) disappoint, but even if that happens, this position could be protected by the strong support he stock formed around $26, where it bottomed a few weeks ago.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that might include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ORLY or CAO.

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Filed under: Deals, Blackstone Group L.P (BX)

Since 1992, Blackstone (NYSE: BX) has been a big player in the real estate business, striking over 200 deals amounting to about $103 billion. Some of its transactions include Hilton ($26.9 billion), Equity Office Properties Trust ($38.6 billion) and Trizec Properties, Inc. ($9.2 billion).

Well, it looks like Blackstone is ready for more dealmaking as the firm has raised $10.9 billion for its next fund (Blackstone Real Estate Partners VI).

But isn’t there a credit crunch? That’s true. What’s more, there are signs of problems in the commercial real estate sector.

However, it looks like Blackstone is going to focus on global markets. Something else: with the dislocations in the U.S. financial markets, there may be some good valuations.

A key advantage with Blackstone is that it has leverage across a big portfolio of existing real estate, as well as operating companies. In other words, I suspect the firm will have tiny trouble putting the billions to work.

In today’s trading, Blackstone’s stock is up 2.58% to $16.29.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the web Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Major movement, Deals, Good news, Hewlett-Packard (HPQ), Options, Technical Analysis, Technology

Hewlett-Packard Co. (NYSE: HPQ) shares are trading higher this day on news that HP is buying privately held and Australia-based Tower Software as part of the company’s effort to increase its business software operations. Tower Software produces software for documents and records management. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on HPQ.

After hitting a one-year high of $53.48 in November, the stock hit a one-year low of $39.99 in January. HPQ opened this morning at $46.11. So far today the stock has hit a low of $46.11 and a high of $47.46. As of 11:40, HPQ is trading at $47.42, up $1.76 (3.85%). The chart for HPQ looks neutral and improving, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the buy and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 7 weeks as long as HPQ is above $40 at May expiration. Hewlett-Packard would have to fall by more than 15% before we would begin to lose money.

HPQ hasn’t been below $40 by more than a penny at all in the past year and has shown support around $46 recently. This trade could be risky if the company’s earnings (due out on 5/15) disappoint, but even if that happens, this position could be protected by support HPQ might find from its 50 day moving average, which is just above $45.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in HPQ.

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Filed under: Before the bell, Analyst upgrades and downgrades, Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Apple Inc (AAPL), Dell (DELL), PepsiCo (PEP), Exxon Mobil (XOM), Hansen Natural (HANS), International Business Machines (IBM), Chevron Corp (CVX), ConocoPhillips (COP), Research in Motion (RIMM), Politics

Before the bell: Futures higher as UBS, Lehman issue equity

The oil sector is in the news today as executives from Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX) and ConocoPhillips (NYSE: COP) head to Capitol Hill to testify on tax breaks, asking why “the cash-rich industry needs $18 billion in tax breaks over ten years.” Instead, some think, this money can be used to subsidize renewable energy projects. In addition, the industry’s record profits will likely be questioned. Meanwhile, oil prices were down to $100.94.

Dell (NASDAQ: DELL) plans to close its desktop manufacturing facility in Austin, Texas as it continues to cut costs and lay off workers — 10% of its workforce — saying these measures will save as much as $3 billion.

Apparently, Microsoft Corp. (NASDAQ: MSFT) is standing firm on its $44.6 billion bid for Yahoo Inc. (NASDAQ: YHOO) and won’t raise it, according to The Wall Street Journal. While many analysts believed the software maker would meet Yahoo! half way and raise its bid, especially as the two met to discuss the bid, it seems Microsoft simply could not find a reason to do so. Or at least so is reported, which could also be a negotiation tactic. YHOO shares are down 1.3% in premarket trading (7:06 a.m.).

International Business Machines (NYSE: IBM) said late Monday it learned it has been temporarily suspended from receiving new business and future contracts while the Environmental Protection Agency is probing possible procurement integrity violations by IBM employees.

Goldman Sachs downgraded PepsiCo Inc. (NYSE: PEP) to Neutral from Buy due to valuation after the stock has gained some 14% this past year, handily beating the S&P 500’s 7% decline. Also, Goldman believes Hansen Natural Corp. (NASDAQ: HANS) offers a more attractive upside. HANS shares are up 3.4% in premarket trading (7:30 a.m.).

CNET news interviewed the CEO of Cymbian, the company that has a dominant share of the market for smartphone operating systems. As a company that’s threatened by Microsoft, Google (NASDAQ: GOOG), Research in Motion (NASDAQ: RIMM) and Apple (NASDAQ: AAPL), he was asked about the different system and pitched a middle ground between the iPhone and the Android.

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Filed under: Before the bell, Deals, Ford Motor (F), General Motors (GM), Market matters, Economic data, Lehman Br Holdings (LEH), Bear Stearns Cos (BSC)

U.S. stock futures were higher early in the morning, suggesting the first day of the new quarter might begin with gains just as several financial firms announced actions taken that investors interpreted more as a sign the credit crisis has bottomed rather than deepening. Some data on the manufacturing industry is also on tap.

U.S. stocks completed a downbeat first quarter with advances Monday, with the Dow industrials rising 46 points, or 0.38%, the Nasdaq Composite rising 17 points, or 0.79%, and the S&P 500 rising 7 points, or 0.57%. Yesterday Wall Street focused on Treasury Secretary Hank Paulson’s plan to overhaul financial regulation.

The focus today will be on financial firms as UBS (NYSE: UBS) and Lehman Brothers (NYSE: LEH) both announced raising capital. As UBS’s writedowns due to exposure to the U.S. subprime crisis reached a whopping $40 billion over the past nine months, the Swiss bank stated it would post first-quarter losses of $12.1 billion and that it would seek $15.1 billion in new capital. Despite the bank announcing that writedowns in the first quarter amounted to $19 billion, UBS shares are up 6.8% in premarket trading (6:00 a.m.) as investors chose to concentrate on action taken rather than losses.

Meanwhile, Lehman Brothers (NYSE: LEH) saw its shares falling in after hours trading after it also announced it would offer up to 3.45 million sharesof convertible preferred stock to boost cash flow and reduce debt, hoping to raise $3 billion. In this case, it seems that investors are not yet confident the bank’s problems as it is most similar in structure to Bear Stearns (NYSE: BSC), which has recently collapsed. Yet, LEH shares are up some 2% in premarket trading (7:00 a.m.).

And last on the list of financial institutions making the news this morning is Deutsche Bank AG (NYSE: DB), Germany’s largest bank, which said Tuesday that it expects first-quarter losses of $4 billion as it joined the growing list of global banks who got caught up with exposure to the U.S. subprime mess.

Economic data due today includes the Institute for Supply Management’s report on nationwide manufacturing activity in March. The ISM index, which already is below 50 — indicating contraction — is expected to decline further and is due out at 10 a.m. February’s reading on construction spending is due out at the same time.

General Motors (NYSE: GM) and Ford Motor (NYSE: F) as well as other automobile manufacturers will release March sales. Overall sales are expected to decline some 13% compared to last year.

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Filed under: Deals, Bad news, Microsoft (MSFT), Yahoo! (YHOO)

Microsoft (NASDAQ: MSFT) isn’t raising its huge for Yahoo! (NASDAQ: YHOO). According to The Wall Street Journal, Microsoft and other deal “strategists argue that the worsening economic downturn and stock-market weakness make the original bid look even more generous.”

And, why should Microsoft make a move? No other bid has emerged. The Yahoo! three-year projections, released to the public has fallen on deaf ears. On most days the portals’s stock trade about $4 below the Redmond offer, a sign that investors fear Microsoft could walk away or Yahoo! could cut a deal to merge with AOL which would drive the Yahoo! stock down. Such a deal could also cause lawsuits from shareholders who anticipate the board to take the best offer. Yahoo! traded at $19 just before Microsoft’s offer.

Yahoo! is trapped. Microsoft knows it. Yahoo! knows it, too. It has tried to find a way out of the trap, but there’s none.

Douglas A. McIntyre is an editor at 247wallst.com.

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