Tyco International (TYC - option chain) shares are rising today on news that Standard & Poor's will add TYC to its S&P 500 index after the close of trading on August 26. The stock will replace Smith International (SII), which will be acquired by Schlumberger (SLB). If you think that the stock 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 TYC.

TYC opened this morning at $38.61. So far today the stock has hit a low of $38.16 and a high of $38.88. As of 11:55, TYC is trading at $38.35 up $1.61 (4.4%). The chart for TYC looks neutral and S&P gives TYC a neutral 3 STARS (out of 5) hold ranking.

Within the first hour of the trading day, option traders were piling into Tyco International (TYC) calls, selling roughly 4,000 of the April 37 calls for 65 cents. These options are out-of-the-money by slightly more than a dollar and are easily the most-active option trading across Tyco today.

Given that open interest at this strike was just 2,283 heading into today's trading, it is plausible that today's volume traded to open. The price action suggests these calls were sold to open, which is a bearish to neutral strategy. The investor in question may already own TYC shares and could be selling these upside calls as a hedge against modest downside during the next two months.

This morning, Tyco International (TYC) announced that it will purchase Brink's Home Security Holdings (CFL) for $2 billion. The $2 billion will be comprised of cash and stock. TYC noted that the deal will combine two of the top companies in North American residential and commercial security under the ADT banner.

Brink's/Broadview Security reportedly has more than 1.3 million recurring revenue accounts in North America, with revenue of roughly $565 million. This is roughly a quarter of ADT's 4.8 million accounts.

Tyco International (NYSE: TYC) is a leading provider of security products and services, fire protection and detection products and services, valves and controls, and other industrial products. The firm has operations in more than 60 countries, employing 118,000 worldwide. Customers include commercial and shipping enterprises, governmental entities, military forces, transportation systems, original equipment manufacturers, engineering contractors and homeowners. General Electric (NYSE: GE) and Honeywell International (NYSE: HON) are major competitors.

The company pleased investors last week, when it reported Q3 EPS of 88 cents and revenues of $5.21 billion. Analysts had been expecting 67 cents and $5.15 billion. Each of the firm's five divisions posted double-digit increases in operating income. Management also guided FY08 EPS to $2.97-$2.99 ($2.76 consensus).

Tyco International (NYSE: TYC) is a leading provider of security products and services, fire protection and detection products and services, valves and controls, and other industrial products. The firm has operations in more than 60 countries, employing 118,000 worldwide. Customers include commercial and shipping enterprises, governmental entities, military forces, transportation systems, original equipment manufacturers, engineering contractors and homeowners. General Electric (NYSE: GE) and Honeywell International (NYSE: HON) are major competitors.

The company pleased investors last week, when it guided fiscal Q1 revenues to $4.87 billion. Analysts had been expecting $4.75 billion. The CEO noted strong operational performances across all business units. Management also boosted FY08 EPS guidance to $2.60-$2.70. That was up from a previous estimate of $2.50-$2.65 and compared well with the consensus Street view of $2.60. UBS subsequently reiterated its 'buy' rating on the issue. TYC shares popped on the news and have since moved into a bullish 'flag' consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the stock with six 'buys,' four 'holds' and one 'underperform.' Analysts see a 27% average annual growth rate through the next five years. The TYC Price to Sales ratio (0.98), Price to Book ratio (1.18) and Price to Free Cash Flow ratio (7.50) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 88% of the outstanding shares. The stock is one of those used to calculate the S&P 100 and S&P 500 Indexes. Over the past 52 weeks, it has traded between $31.01 and $55.17. A stop-loss of $32.40 looks good here. Note that the firm is expected to release Q1 results on February 5th, before the open.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

Dennis Kozlowski is everywhere these days. CNBC featured an interview with the former Tyco International Ltd. (NYSE: TYC) chief executive from jail where he spoke about the difficulty in doing hard time and how he's helping his fellow inmates earn their GEDs. A Wall Street Journal editorial recently argued that Kozlowski was "railroaded" and that "living large isn't a crime."

Funny thing is that his former company seems to be doing just fine unwinding the empire that Kozlowski built. The conglomerate, which is splitting up into three separate companies, today reported better-than-expected third quarter results. Net income was $181 million, or 36 cents per share. Excluding one-time items, profit was $285 million, or 57 cents. Revenue jumped $5.03 billion. The results beat Wall Street consensus estimates of 55-cent profit on revenue of $4.97 billion.

Shares of Tyco are down $1.11, or 2.82%, to $38.20 because Tyco's yearly guidance for profit of $2.50 to $2.65 a share was below the $2.62 analysts had projected.

In a conference call with analysts, Kozlowski's replacement Ed Breen said the company was "cautiously optimistic" about its outlook for 2008, according to Bloomberg News. The company's revenue growth of 5.4%, which beat Tyco's estimates, was particularly impressive.

Shares of Tyco, which are down about 18% over the past year, are trading at near their 52-week low. Do some investors miss Kozlowski? Maybe. But if the world never learned about $6,000 shower curtains and tacky birthday parties, "Deal a Day Dennis" probably would have been forced to split up the company he cobbled together through acquisitions. Conglomerates, including General Electric Co. (NYSE: GE), are no longer the darlings that they once were on Wall Street.

Tyco International Ltd. (NYSE:TYC) shares have performed dismally since it completed its spin-off of Tyco Electronics Ltd. (NYSE:TEL) and Covidien Ltd. (NYSE:COV). In fact, those have been poor performers as well. It isn't easy being one of the few naysayers ahead of a major event like this, but there are frequently too many conflicted reports out there. Does anyone expect that the large investment banking firms facilitating that deal or near-term financing would actually post a 'HIGH CAUTION" alert on any of the companies? Exactly.

Before the spin-off was implemented, I noted a "phantom premium" in Tyco's stock because the investing world was just too much in love with spin-offs, mergers, and private equity at the time. Interestingly enough, this shakeout may be going a bit too far as far as the overall values of the three units now. There is more data that needs to be crunched to verify this, but next week subscribers of the Special Situation Investing Newsletter will receive a newsletter with a tie of a company to one of the remaining ex-Tyco Newco stocks.

We ran a basket analysis this morning and showed that the ex-Tyco group as a whole was down twice as much as the general markets off of the July highs. That was also before the drop in all three stocks this morning. Mergers and special situations are not dead by any means. But now the funny-money deals are going to be a thing of the past. Deals might even have to make sense other than the greater fool theory from here on out. The good news is that the stupidity in mergers and special situations has been flushed out of the market and analysis doesn't have to worry about irrational conditions clouding up the picture.

Jon Ogg is a partner in 24/7 Wall St., LLC; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Main market news: Before the bell: Futures flat ahead of Fed announcement

Starting tomorrow, Microsoft Corp. (NASDAQ: MSFT)'s Xbox 360 video game console will sell for $50 cheaper. Microsoft also prevailed in court Monday when Alcatel-Lucent's $1.53 billion patent infringement win against MSFT was overturned. Alcatel-Lucent said it would appeal.

A federal judge has ruled that Qualcomm Inc. (NASDAQ: QCOM) waived rights to disputed patents in its case against Broadcom Corp. (NASDAQ: BRCM).

Tyco International (NYSE: TYC) reported a sharp rise in its flow control division Tuesday, helping to boost quarterly earnings.

A childhood development study found children preferring foods -- vegetables and all -- in McDonald's (NYSE: MCD) packaging.

Tyco International Ltd. (NYSE: TYC) hosts its analyst meetings Tuesday to showcase its new spin-off companies. Late last week we saw trading begin in the two spin-offs on a when issued basis:

The Tyco Healthcare unit is named Covidien Ltd. and is trading under a when-issued ticker (NYSE: COV) or on most symbols as "COV-WI"; Covidien traded down 0.5% to $46.25 yesterday.

The Tyco Electronics"unit is appropriately named Tyco Electronics and trades as (NYSE: TEL) or "TEL-WI"; Tyco Electronics closed down 4.25% yesterday at $37.15.

The remaining company for all of the security and fire company is remaining Tyco International Ltd. and keeping the "(NYSE: TYC)" ticker; shares traded down 0.67% to $34.09 yesterday.

Tyco International Ltd. (NYSE: TYC) opened at $32.61. So far today the stock has hit a low of $32.47 and a high of $33.00. As of 10:45, TYC is trading at $32.99, up $0.33 (1.0%).

After weathering a decline in 2006, this stock has made some slow but steady gains over the last nine months, hitting a 52-week high of $33.29 in February and showing support around $32 in recent months. Warren Buffett's 10 million shares of TYC make up just over half a percent of his portfolio. He picked up these shares near a high point for the stock in September 2005 and has not sold or purchased any further TYC shares since that time. Buffett's famed buy-and-hold strategy singles out stocks that the guru expects will have solid index-beating long-term performance. Thanks to last year's drop, TYC isn't trading much higher now than when he bought his shares in 2005, so now may not be a bad time to get in on the growth Buffett has been patiently expecting. Recent technical indicators for TYC have been bullish but deteriorating slightly, 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 October bull-put credit spread below the $30 range. TYC hasn't been below $30 for more than a day or two since November and has shown support around $32 recently. This trade could be risky if the stock's Q3 earnings (due out in August) disappoint, but even if that happens, TYC is a relatively steady company due to its diversity and has strong support around $30 that could protect this position.

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 a position in TYC.

A couple of months ago, I wrote an entry for Tyco International Ltd, (NYSE:TYC) explaining that I didn't think the growth prospects were strong enough to take a big chance on the stock. Since then, Tyco has announced new quarterly results, and the growth -- although not breathtaking -- is certainly heading in the right direction.

Growth has been strongest in the electrical division and weakest in the health care division; results have been middling in the engineering and security divisions. The price has climbed a dollar or two since then, but that's the nature of a stock that is as volatile as Tyco.

There has, however, been a development that makes Tyco much more appealing in my eyes. The company has announced a restructuring plan, which involves breaking up into three separate companies: A health care company, an electrical company, and a security/engineering company. This could prove to be a great boon to shareholders clever enough to look past this company's history.