The Bank of New York Mellon Corporation (NYSE: BK) opened at $46.47. So far today the stock has hit a low of $45.49 and a high of $46.57. As of 11:15, BK is trading at $45.75, down $0.38 (-0.8%).

Following a strong surge over the past six weeks, the stock hit a new 52-week high yesterday at $46.93. The company announced earnings of 63 cents per share, just beating Wall Street expectations of 61 cents per share, but profit slipped a hair due to costs stemming from the company's purchase of Mellon Financial Corp. Recent technical indicators for the stock have been bullish and steady, while S&P gives BK a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make an 11.1% return in just 2 months as long as BK is below $50 at September expiration. BK would have to rise by 9% before we would start to lose money.

BK hasn't been above $50 at all this year but has been rising sharply recently. This trade could be risky if it turns out that the only reason earnings were down was due to the acquisition.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in BK.

Analysis provided by Joseph Lazzaro of Theflyonthewall.com:

Bigger isn't always better, but in the case of the Bank of New York's (NYSE: BK) purchase of Mellon (NYSE: MEL) for $16.5B, it almost certainly is.

The Bank of New York, which was founded in 1784 by U.S. Constitutional framer Alexander Hamilton, has long been a major player in asset management / asset servicing, and in treasury and clearing services. The Bank of New York will now add Mellon's asset management business and institution services, along with its cash management business, to become a major player in custodial services. The combined bank, which will be known as The Bank of New York Mellon Corp., will administer $16.6T for institutions, will have $1.1T in assets, and annual revenue of $12B.

As part of the deal, Bank of New York shareholders will receive 0.934 new shares for each BK share they hold, while Mellon shareholders will get one new share for each MEL share they own.

Further, each stock's price movement Monday indicated Wall Street's overall approval of the deal. Generally, after a deal is announced the acquiring company's stock drops, and the acquired company's stock rises. Not so with this deal: as of early Monday afternoon, both stocks had risen substantially - Mellon gained $2.50 to $42.55 and the Bank of New York surged $4.10 to $39.59.

Analysts say the deal should generate significant synergies that will reduce operating costs. The two companies said they expect to cut about 3,900 jobs from their current combined workforce of 40,000, lowering the combined entity's annual operating costs by about $700M, or by 8.5%. Restructuring charges will total about $805M.

Investment Analysis: The best way for the typical investor to play the BK/MEL deal? If your portfolio can tolerate moderate risk, consider adding shares of BK on a pull-back to near $39. However, as a result of the deal's positive reception, BK's shares may climb over $40 before you have a chance to buy. If BK rises over $40, let the stock close over $40 per share for a second day, and if it does, buy it at that time. If it doesn't close above $40, buy on a pullback to $39 or $38.

This morning, The Bank of New York Company (NYSE: BK) announced the $16.8 billion stock acquisition of Mellon Financial Corporation (NYSE: MEL). Combined, the companies will have about $12.5 billion of annual revenue, rank first worldwide with more than $16 trillion of assets under custody, and rank in the top 10 with more than $1.1 trillion of assets under management.

The BK/MEL deal makes sense because securities processing -- managing the paperwork and information flows between buyers and sellers of stocks and bonds and all the parties in between -- is a scale sensitive business. In other words, the bigger you are, the lower are your costs to process a transaction. And the lower your unit cost, the more leeway you have in price cutting to win lucrative contracts.

The stock market appears to like the deal -- BK is up 8.4% and MEL has risen 5% in pre-market trading. Usually the acquirer's stock drops on such announcements so this is an unusual vote of confidence.

This deal is likely to spur more such deals and State Street Corporation (NYSE: STT) and Northern Trust Corporation (NYSE: NTRS) are two of the most likely merger candidates. STT has $11.3 trillion in assets under custody -- $8 trillion more than NTRS's $3.3 trillion. STT could acquire NTRS since its $20 billion market capitalization is $8 billion more than NTRS's.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, and a Professor of Management at Babson College. He has no financial interest in Bank of New York, Mellon Financial, Northern Trust or State Street.

Stock futures were a little higher on a fair value basis early this morning, pointing to a similar start to stocks.

There are no economic data of note released today. Oil prices were lower as OPEC, worried about the weakening dollar, is leaning towards further production cuts. However, Hugo Chavez claimed reelection was widely expected.

What's really making headlines this morning, a story that's been developing over the weekend, is Pfizer, Inc. (NYSE:PFE). The world's largest drugmaker saw its shares sinking as much as 12% in Frankfurt after it had announced it would halt the development of a key new cholesterol treatment, torcetrapib, due to safety concerns and higher death rates in trials. On the NYSE, some analysts are predicting PFE shares, which have closed at $27.86 on Friday, would plunge to $20.

The other big news item today is the announcement that Bank of New York Co. (NYSE:BK) will merge with Mellon Financial Corp. (NYSE:MEL) creating the world's largest securities servicing and asset management firm -- Bank of New York Mellon Corp. -- with $16.6 trillion under custody. In the announced stock deal, Mellon will pay a premium of about 6.5% over Bank of New York shares, worth $28.4 billion.

In other corporate news:

Qualcomm Inc. (NASDAQ:QCOM) announced it is buying two micro-chip businesses to boost its core wireless technology product offerings. While the deals, to close in December, would be dilutive in 2007, they should be slightly accretive in 2008. Qualcomm is buying the majority of microchip maker RF Micro Devices Inc.'s (NASDAQ:RFMD) Bluetooth assets for $39 million and paying an undisclosed amount of cash to buy privately-owned startup Airgo Networks Inc.

LSI Logic Corp. (NYSE:LSI) announced it will purchase competitor Agere Systems Inc. (NYSE:AGR) for $4 billion in all stock deal.

Finally, on Friday after the bell, Bank of America Corp. (NYSE:BAC) surprisingly announced that Chief Financial Officer Al G. de Molina will resign at the end of the year after only 15 months in the position. He will be succeeded by executive Joe Price.

ON CNBC's Stop Trading segment today, around 2:40 PM EST, Jim Cramer weighed in light sweet crude. He doesn't know where you would put a tanker now and thinks oil is still going to $56 before interest comes in. He would have puts on Oil Service Holders (AMEX: OIH). In fact, Cramer said he would be worried if he was in the oil names and also said that the DJIA is oil-light, so it would go up more if oil drops.

Staying on the DJIA, Cramer thought that today's rapid profit taking when the Dow reached 12K+, was a little too fast.

As for JPMorgan Chase & Co (NYSE: JPM) quarterly results, Cramer said they were better than they got credit for, and he said the financials are all "1-down, 4-up," meaning he thinks there is $1 downside and $4 upside.

On Mellon Financial Corp (NYSE: MEL), Cramer thinks the company had an unbelievable earnings number with headcount flat. Mellon and Goldman Sachs Group Inc. (NYSE: GS) are buys, he said, while GS is ready for an earnings multiple expansion.

Parker-Hannifin Corp (NYSE: PH) stock is cheap, Cramer said.

Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own securities in the companies he covers.