Lehman Brothers Holdings Inc. (NYSE: LEH) opened at $61.64. So far today the stock has hit a low of $60.20 and a high of $63.80. As of 11:00, LEH is trading at $61.84, down $$2.94 (-4.5%).

After hitting a one year high of $86.18 in February, the stock has been beaten down by credit woes over the past several months, hitting a year-low of $52.63 on Monday before bouncing nicely over the next few days. LEH is taking a hit today following Archstone-Smith's (NYSE: ASN) earnings report last night. Lehman has agreed to purchase the company, which reported earnings well short of analyst expectations for the second quarter. Jim Cramer has strongly advised against investing in financials, including LEH, until earnings estimates get seriously reduced to more realistic levels. After Wachovia cut broker estimates yesterday, Cramer notes that LEH's price to earnings ratio of 7.5 seems cheap enough to consider buying the stock in the next dip. LEH's action today may be a good buying opportunity for investors looking to get into financials at what Cramer calls an investable bottom. Technical indicators for LEH are bearish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make a 6.4% return in 6 weeks as long as LEH is above $45 at September expiration. LEH would have to fall by more than 27% before we would start to lose money.

LEH hasn't been below $52 at all in the past year, even at the bottom of its recent drop, and has shown support around $60 recently. This trade could be risky if the financials start to drop again, but this trade is well below the previous bottom for LEH.

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 LEH or ASN.

MAJOR PAPERS:

• Higher interest rate are making commercial real estate deal makers think twice about deals, according to the Wall Street Journal's "Heard on the Street," sending shares of companies like Archstone-Smith Trust (NYSE: ASN) down from $64 to $60.75 a share.
• The Financial Times reported that U.S. senators have proposed new laws that would impose higher taxes on private equity firms that list their shares on stock exchanges, a move that could be a blow to private-equity firm Blackstone Group, which is seeking to list its shares.
• The U.S. and U.K. are working on a treaty that would allow Britain to buy American weapons without obtaining export licenses, the Financial Times reported; any deal on the issue could face opposition in the U.S. Congress, although the British believe eliminating the need for the licenses would expedite the arms purchasing process.

OTHER PAPERS:

• Turnaround candidate Eastman Kodak Company (NYSE: EK) may be ready to shine, BusinessWeek's "Inside Wall Street" column reported, and now may be a good time to evaluate a potential EK play, according to investment advisor Gregory MacArthur.
• Gateway Inc (NYSE: GTW) is selling products in China for the first time in a pilot program with Digital China Holdings Ltd, the LA Times reported.
• According to The Nation, The Dow Chemical Company (NYSE: DOW) is planning to ask its board of directors later this year for approval to invest in five petrochemical projects in Thailand.
• Cementos Portland Valderribas, a unit of Fomento de Construcciones y Contractas is planning a bid for Texas Industries Inc (NYSE: TXI), the Expansion reports, citing people close to the situation.

MOST NOTEWORTHY: Yahoo! (YHOO), Genzyme (GENZ) and Dress Barn (DBRN) were today's noteworthy upgrades:

• Yahoo! Inc. (NASDAQ: YHOO) was upgraded to Overweight from Neutral at JP Morgan as the firm believes the company has addressed weakness in display advertising with recent partnership announcements and the acquisition of Right Media. Additionally, the firm still sees upside to Panama.
• Genzyme Corp. (NASDAQ: GENZ) was upgraded to Buy from Neutral at Goldman Sachs, citing valuation and a favorable risk/reward.
• Merriman upgraded shares of Dress Barn (NASDAQ: DBRN) to Buy from Neutral to reflect the improved sales trends in May and sees the stock trading at the high end of its peer group average or in a range of $25.50-$27.00.

OTHER UPGRADES:

• Deutsche Telekom (NYSE: DT) was upgraded to Buy from Sell at Societe Generale, which also added shares to its Premium List.
• Lehman Brothers upgraded AvalonBay Communities (NYSE: AVB) to Equal Weight from Underweight, as the firm views AVB as a close comp to Archstone-Smith Trust (NYSE: ASN). Lehman also upgraded Post Properties (NYSE: PPS) to Equal Weight from Underweight, citing industry M&A activity, and China Life Insurance (NYSE: LFC) to Buy from Neutral, citing valuation.
• Deutsche Bank upgraded shares of BG Group plc (NYSE: BRG) to Buy from Hold to reflect expected growth in the company's liquefied natural gas business.
• Red Hat Inc. (NYSE: RHT) was upgraded to Outperform from Neutral at Robert W Baird, which expects improved performance at JBoss and a positive mix shift in the core O/S business following the release of RHEL 5.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Bioenvision (BIVN), Archstone-Smith Trust (ASN) and GlaxoSmithKline (GSK) were today's noteworthy downgrades:

• Rodman & Renshaw downgraded Bioenvision to Market Perform from Outperform, as the firm expects the majority of shareholders to vote in favor of Genzyme Corp.'s (NASDAQ: GENZ) acquisition, but does not believe the transaction price reflects the true value of the company.
• Bioenvision Inc. (NASDAQ: BIVN) was also downgraded at UBS to Neutral from Buy due to the acquisition.
• Archstone-Smith Trust (NYSE: ASN) was downgraded to Hold from Buy at Stifel Nicolaus, to Market Perform from Outperform at Wachovia and to Market Perform from Outperform at Friedman Billings following the acquisition by Tishman Speyer and Lehman Brothers Holdings Inc. (NYSE: LEH).
• GlaxoSmithKline (NYSE: GSK) was downgraded to Sell from Neutral at Merrill Lynch to reflect an unattractive risk/reward profile as they believe Avandia sales will be negatively impacted by the safety concerns raised in the New England Journal of Medicine.

OTHER DOWNGRADES:

• Clayton Holdings Inc. (NASDAQ: CLAY) was downgraded to Market Outperform from Strong Buy at JMP Securities, as the firm believes a 2H07 recovery in the subprime MBS market is becoming less visible.
• CDW Corp (NASDAQ: CDWC) was downgraded to Peer Perform from Outperform at Bear Stearns following the acquisition by Madison Dearborn Partners.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

More M&A activity this morning helped push U.S. stock index futures higher, suggesting yet another high open for U.S. stocks at the start of this shortened trading week.

U.S. stocks ended last week with losses on a very light economic calendar week. This week will be full of economic data including housing data, non-farm payroll, GDP and housing indicators.
Today, the Conference Board will release its May consumer confidence, which is expected to tick up from last month.

Overseas, Asian stocks closed mostly higher and European stocks climbed for the first time in three days after a sales forecast from Vodafone Group Plc lifted phone companies.

Most of the buzz this morning is in the form of M&A news:

A consortium led by Royal Bank of Scotland launched a €71.1 billion $95.5 billion) offer for ABN Amro (NYSE: ABN). The hostile bid is some 10% higher than that of Barclays (NYSE: BCS) and would block the sale of LaSalle Bank by Bank of America (NYSE: BAC).

Tishman Speyer Properties and Lehman Brothers Holdings Inc. (NYSE: LEH) are close to a deal to acquire real estate investment trust Archstone-Smith Trust (NYSE: ASN), according to The Wall Street Journal in a deal that could top $20 billion, including debt. ASN shares are up over 5% in pre-market trading (6:33 a.m.).

Norsk Hydro and Rio Tinto (NYSE: RTP) declined to confirm or deny reports that they may place separate bids for Alcan (NYSE: AL). Reports, however, claim Rio Tinto has hired Deutsche Bank for help on the possible bid. Meanwhile Alcan is still trying to fight off a hostile bid from Alcoa (NYSE: AA). AL shares are up another 1.6% in pre-market trading (7:19 a.m.).

Avaya Inc. (NYSE: AV) is in talks with private-equity firms and other potential bidders about selling all or part of the company, according to the Wall Street Journal. Specifically Avaya is cited to be in talks with Silver Lake Partners about a possible LBO. AV shares are up 13.4% in pre-market trading ( 7:42 a.m.).

Ford Motor Co. (NYSE: F) is said to be planning the sale of Swedish car maker Volvo to German carmaker BMW according to a Swedish newspaper, The Goteborgs Posten daily.

Shares of British Airways Plc (NYSE: BAB) rose 4.5% on speculation the airline could attract a private-equity bid.

MOST NOTEWORTHY: MGM Mirage (MGM), KLA-Tencor Corp (KLAC), Raytheon Co (RTN) and four apartment REIT's were today's noteworthy upgrades:

• Bear Stearns upgraded MGM Mirage (NYSE: MGM) to Outperform from Peer Perform following Kirk Kerkorian's intentions to purchase the Bellagio and City Center and also pursue strategic alternatives for the rest of the company.

• Matrix raised KLA-Tencor (NASDAQ: KLAC) to Buy from Hold, believing that growing demand for memory chips used in computers is leading to increasing revenues and profits.

• Cowen upgrade shares of Raytheon (NYSE: RTN) to Outperform from Neutral based on cash deployment potential from the RAC sale, pension EPS tailwind, foreign sales cycle, and strong execution.

• Wachovia upgraded shares of Archstone-Smith Trust (NYSE: ASN) and Apartment Investment and Management Co (NYSE: AIV) to Outperform from Market Perform and Equity Residential (NYSE: EQR) and UDR, Inc (NYSE: UDR) to Market Perform from Underperform...

OTHER UPGRADES:

• AG Edwards upgraded Marathon Oil Corp (NYSE: MRO) and Royal Dutch Shell (NYSE: RSA.A) to Buy from Hold.

• Stifel raised Citrix Systems, Inc (NASDAQ: CTXS) to Buy from Hold.

• RBC Capital raised Kilroy Realty Corp (NYSE: KRC), Boston Properties, Inc (NYSE: BXP) and Maquire Properties, Inc (NYSE: MPG) to Sector Perform from Underperform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).