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 consider an August bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase 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 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.

MOST NOTEWORTHY: Certain banks, VASCO Data Security and Bankrate were today's noteworthy downgrades:

• UBS downgraded shares of Discover (NYSE: DFS) and Capital One (NYSE: COF) to Sell from Neutral and American Express (NYSE: AXP) to Sell from Buy, as they believe a U.S.-led recession will lead to increased credit losses.
• Jefferies downgraded shares of VASCO Data Security (NASDAQ: VDSI) to Hold from Buy to reflect the company's exposure to the financial services market, as they believe 2008 will be a tough year for small companies selling into tightening IT budgets.
• Merriman lowered its rating on Bankrate (NASDAQ: RATE) to Neutral from Buy on valuation, as they believe the stock is pricing in upside from strong website traffic seen in January driven by refinance activity and Fed rate cuts. Citigroup downgraded shares to Hold from Buy on valuation, as they find the risk/reward less compelling at current levels.

OTHER DOWNGRADES:

• JP Morgan removed SanDisk (NASDAQ: SNDK) from its Top 3 Picks List.
• Goldman downgraded CSK Auto (NYSE: CAO) to Neutral from Buy and removed Google (GOOG) from its Conviction Buy List.
• Baird lowered Comerica (NYSE: CMA) to Neutral from Outperform.