NYSE Euronext (NYX) and Deutsche Boerse AG of Germany recently announced a merger that will create the world's largest financial exchange. NYSE is the world's largest stock exchange in the world by market capitalization of its listed companies and Deutsche Boerse AG is the largest stock exchange operator in Germany. NYSE Euronext's main competitors are Nasdaq OMX (NDAQ) and CME Group (CME).

We have a price estimate of $34.77 for NYSE Euronext's stock, which stands below market price.

The future investment stars are already with us. The NYSE Financial Future Challenge, operated by the NYSE Foundation, By Kids for Kids, K12 Inc. and the United Investors Association, is in full swing, with five finalists just identified. To reach this level, the participants had to develop a new product, idea or process that would "excite, educate and motivate their peers" to become interested in the financial marketplace. The eventual winner lurks within this subset and will receive a $2,500 prize -- a great way to get that portfolio started. And, he or she will be feted at a closing bell ceremony at the NYSE (NYX) on January 11, 2010.

The finalists presented a variety of ideas which are sure to generate some buzz. Kelsey Foss, a 12-year-old from Mountainville, NY, proposed a new television show, "Stock Market Tycoon Idol," which would harness the popularity of reality TV while amping up the content. The program would involve the journeys of 10 kids as they seek to make money or lose it, with the possibility of becoming virtual millionaires along the way. The show would be set at a mock NYSE studio on Wall Street, and exports would be brought out to mentor the contestants. The reality TV reach would help engage a younger audience.

The IPO market has been pretty slow for the past two years due to the effects of a subprime mortgage crisis that turned into a credit crisis that turned into a worldwide financial crisis and recession. Nonetheless, two companies made their debuts Thursday -- one on the NYSE (NYSE: NYX), the other on the NASDAQ -- and they nailed it. Hyatt Hotels (NYSE: H) gave its investors a 12% gain on its first Big Board trading day, and Ancestry.com (NASDAQ: ACOM) switched those digits, jumping 21% in its first day of trading.

Hyatt Hotels overcame two major concerns. The worldwide travel market slump has been tough on hotel companies, and Hyatt has been subject to the same forces as everyone else. Also, investors may have been worried about infighting among the founder's heirs (the Pritzker family), but the double-digit price increase suggests that investors don't foresee Bancroft-style squabbles screwing investors -- or, if you don't like Dow Jones, now a part of News Corp (NASDAQ: NWS), Playboy (NYSE: PLA) makes the same point.

With listed stocks getting knocked around, the New York Stock Exchange is considering extending temporary relief from listing requirements. Once a company is dropped from the exchange, it runs risks ranging from market cap loss to limited liquidity. But NYSE Euronext (NYSE: NYX) CEO Duncan Niederauer was clear that the moves are not permanent. For now, the goal remains to protect companies that are at risk of being delisted. This comes after the S&P 500 fell 38% last year -- its worst performance since 1937.

The two rules that have been relaxed are the maintenance of a share price of at least $1 and a market cap of at least $15 million. The return of both measures was delayed back in April. Currently, 31 companies on the NYSE are at risk, including Blockbuster Inc. (NYSE: BBI) and Lear Corp (NYSE: LEA).

NYSE Euronext (NYSE: NYX - option chain) stock is falling today after posting a fourth-quarter loss of $1.34 billion, or $5.06 per share, this morning. Excluding one-time items, NYX earned $137 million, or 52 cents per share, during the quarter, missing analysts' estimates of 56 cents per share. NYX was hurt by lower list fees and derivative revenue during the quarter. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on NYX.

This morning, NYX opened at $21.30. So far today the stock has hit a low of $20.16 and a high of $22.03. As of 12:45, NYX is trading at $21.40, down $1.50 (-6.5%). The chart for NYX looks bullish and S&P gives NYX a positive 4 STARS (out of 5) buy ranking.

There is a lot of money sitting on the sidelines waiting for the right time to get back into the stock market. Maybe that time will be after the Dow Jones Industrial Average tests 7000, or even 6000. Maybe it will be after quarterly reports start turning positive. I'm sure many people will not do anything until the housing market turns around. Then there are those that have sworn off the stock market or at least individual stocks entirely.

These and a multitude of other issues may be keeping you from investing for now and no one could blame you, but if it is your intention to get back in when the coast is clear then you should be making some preparations by putting together your watch list.

Here are some of the stocks on my watch list. I usually have about 20 stocks that I am interested in. Some of them I own already and I am interested in acquiring more. Some have appeared in my Chasing Value column, and some or all might appear there again.

Annaly Capital Management (NYSE: NLY) is one of the stocks mentioned in Fortune Magazines "Ten Promising Stocks for 2009" and is currently paying almost a 15% yield at Fridays closing price of $14.92. The company borrows money at short term rates and only invests in long-term Federally backed mortgages. They have avoided subprime loans and derivatives entirely.

Boardwalk Partners (NYSE: BWP) is expanding and was highlighted today as another high yield value stock Chasing Value: High yield thru Boardwalk's pipes that you can acquire for less than the price the general partners paid in October.

Burlington Northern Santa Fe (NYSE: BNI) can claim Berkshire Hathaway (NYSE: BRK.A) as it's largest shareholder and you can buy shares for less than 'my pal Warren' did.

Intuitive Surgical (NASDAQ: ISRG) is one of my top holdings and favorite companies. I have owned it for years and only selling some shares at $192. I recently started building a new position in a new portfolio in the past few months and I am interested in buying more. It closed at 134.38 on Friday.

Nasdaq (NASDAQ: NDAQ) closed at $23.80. Bernard Madoff of Bernard Madoff Investment Securities LLC, was arrested by Federal agents because his investment advisory business was a "giant Poinzi scheme" reports the Wall Street Journal. NDAQ January option implied volatility of 85 is above its 26-week average of 70 according to Track Data, suggesting larger price movement.

NYSE Euronext (NYSE: NYX) closed at $25.98. NYX January option implied volatility of 97 is above its 26-week average of 72 according to Track Data, suggesting larger price movement.

Charles Schwab (NASDAQ: SCHW) closed at $16.98. SCHW January option implied volatility of 99 is above its 26-week average of 61 according to Track Data, suggesting larger movement.

TD AmeriTrade (NASDAQ: AMTD) closed at $12.92. AMTD January option implied volatility of 82 is above its 26-week average of 60 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

CME Group (NYSE: CME) shares are falling after competitor NYSE Euronext (NYSE: NYX) reported a first-quarter profit above analysts' estimates. CME's earnings that disappointed investors two weeks ago look even worse in light of NYX's good results this morning. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CME.

After hitting a one-year high of $714.48 in December, the stock hit a one-year low of $399.01 in March. This morning, CME opened at $487.00. So far today the stock has hit a low of $476.27 and a high of $487.65. As of 12:40, CME is trading at $481.03, down $8.32 (-1.7%). The chart for CME looks neutral but improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $550 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 a 9.9% return in six and a half weeks as long as CME is below $550 at June expiration. CME would have to rise by more than 14% before we would start to lose money. Learn more about this type of trade here.

MAJOR PAPERS:

• Once thought to be extremely safe, action rate securities have proved difficult to sell in this credit crisis. Tech companies are big holders of them and are taking charges left and right, including MetroPCS Communications Inc (NYSE: PCS), Palm Inc (NASDAQ: PALM) and Earthlink Inc (NASDAQ: ELNK), according to the Wall Street Journal.
• Electronic Arts Inc (NASDAQ: ERTS) is again urging Take-Two Interactive Software Inc (NASDAQ: TTWO) to negotiate after it recommended that its stockholders not sell any of its shares to EA and help its $2B takeover bid, the Financial Times reported.

OTHER PAPERS:

• NYSE Euronext Inc (NYSE: NYX) will look to increase its stakes in India's National Stock Exchange and the country's Multi Commodity Exchange, the Business Standard reported, once foreign ownership rules are eased. NYSE Euronext also intends to partner with the two Indian exchanges in order to help them develop their business.

WEB SITES:

• Business Week reported that Brian Marckx of Zacks Investment Research said Bristol Myers Squibb Company (NYSE: BMY) may be an attractive takeover candidate for a larger pharma such as Pfizer Inc (NYSE: PFE) or France's Sanofi-Aventis SA (NYSE: SNY), both of which have been partners with Bristol on some of its products.

The exchange stocks have been hot issues in the past few quarters as investors have been betting on increased trading activity from hedge funds, higher volatility, and so on.

But just this week, exchange stocks have received a beating harder than the markets as a whole. I believe that if a snapback rally occurs next week, these stocks should bounce back harder than the overall market. Two particular exchange stocks have appealing charts: CME Group (NYSE: CME) and NYSE Euronext (NYSE: NYX). Both of these charts display similar characteristics, as you can see below:

New York Stock Exchange Chief Executive John Thain has been picked by Merrill Lynch & Co. (NYSE: MER) to be its next CEO, according to media reports.

The New York Post, which broke the story, writes "The move is a huge coup for Merrill and board member Alberto Cribiore, who has led the search for a new CEO after (Stan) O'Neal resigned on Oct. 30."

But Merrill's quick move is bad news for CItigroup Inc. (NYSE: C), which had wanted to hire Thain to replace its unpopular (and now ex) CEO Chuck Prince, the Post says.

The move is unexpected, according to the Wall Street Journal [subscription required], which said "insiders on Wall Street" had speculated that BlackRock Inc. CEO Larry Fink would get the job. CNBC is reporting that Fink was offered the job but turned it down.

Thain's departure from NYSE Euronext (NYSE: NYX) isn't a shock. He viewed the job, which he got after the departure of Richard Grasso, as a public service, according to the Journal. Shares of Merrill Lynch, down more than 35% this year, rallied on the news, rising $2.82, or 5%, to $59.75. NYSE Euonext and Citigroup were little changed.

The reshuffling of Wall Street's top management is far from over. Watch this space.

MAJOR PAPERS:

• Due to accelerating losses at its American consumer-lending unit, HSBC Holdings PLC (NYSE: HBC) said it would take $3.4B in charges during its Q3, the Wall Street Journal reported. Despite the charges, the company said its Q3 operating income was up compared with the prior year due to revenue growth in the group.
• NYSE Euronext Inc (NYSE: NYX) CEO John Thain is not on the first short list of candidates being considered for the Citigroup Incorporated (NYSE: C) CEO position, according to an inside source, the Financial Times reported.

OTHER PAPERS:

• Lululemon Athletica Inc (NASDAQ: LULU), a standout performer on Wall Street, is reportedly under fire for potentially false claims of its VitaSea clothing line, which the company says is made from seaweed fiber supplied by SeaCell. According to lab tests, the New York Times reported there was no significant difference in the mineral levels between regular cotton T-shirts and Lululemon's VitaSea fabric.

This year has been a stock picker's market extraordinaire! This month's review provides ample evidence of this, as you'll note that Google (NASDAQ: GOOG), which I included for fun because of its popularity, beat all else as a portfolio of one. The average of my seven picks came in second, beating James Cramer's average based on his nine picks. Both Cramer and I beat each of the three indices I am tracking, and therefore beat the average as well, with the largest and most stable, the Standard & Poor's 500 coming in last.

Of course, this could easily change given recent market volatility. A sharp downturn in the market could reverse our fortunes. A lot can happen in the remaining two months -- I take nothing for granted.

While Google shined brightly this year, Cramer and I have each made one pick that shined brighter. Cramer's best, Apple (NASDAQ: AAPL) has gone into orbit this year on the wings of the iPhone, iPod, and growing Mac sales. Benefiting from rising oil prices, shortages in China and the Chinese government allowing a 10% price hike, my PetroChina ADR (NYSE: PTR) has rocketed, becoming the second-largest capitalized company in the world. PTR has done this even in the shadow of Berkshire Hathaway (NYSE: BRK.A) selling its shares and Warren Buffett questioning the huge appreciation of the Chinese stock market and stocks overall.

MAJOR PAPERS:

• According to a person briefed on the situation, Merrill Lynch & Co Inc's (NYSE: MER) CEO Stan O'Neal was negotiating the terms of his forced departure on Sunday and the departure is expected to be announced on Monday. The top contenders for the CEO position are said to be BlackRock Inc's (NYSE: BLK) CEO Laurence Fink and NYSE Euronext Inc's (NYSE: NYX) CEO John Thain, the Wall Street Journal reported.
• The WSJ also reported that Alibaba.com raised $1.5B after the company priced its IPO at HK$13.50, at the top-end of the HK$12-$HK13.50 range. Yahoo! Inc (NASDAQ: YHOO) holds a 39% stake in Alibaba Group.

OTHER PAPERS:

• Ness Technologies Inc (NASDAQ: NSTC) was awarded a contract worth NIS 5 Million to convert the pension fund data managed by Opal Future Technologies, Globes reported.
• Indian company Dr. Reddy's Laboratories Limited (NYSE: RDY) is set to attempt to raise its share of the U.S. over the counter drug market by partnering with at least six more U.S. retail chains; the company plans to launch up to 10 drugs over the next 12 months that could become OTC offerings in the U.S., the Economic Times reported.

WEB SITES:

• According to TechCrunch, IAC/InterActiveCorp (NASDAQ: IACI) may have submitted a letter of intent to acquire movie-centered social network Flixter over the last week or so.

NYSE Euronext, Inc. (NYSE: NYX) is surging today after Standard & Poor's announced that NYX will replace Hilton Hotels Corp (NYSE: HLT) in the S&P 500 after the market closes Oct. 24. S&P also announced that NYX will replace Limited Brands (NYSE: LTD) in the S&P 100. Joining these indices means that any mutual funds that track the index will need to buy shares, which should cause much higher demand over the next few months. 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 NYX.

After hitting a one-year high of $112.00 in November, the stock sagged to a 52-week low of $64.26 in August. NYX opened this morning at $86.20. So far today the stock has hit a low of $84.93 and a high of $86.39. As of 10:40, NYX is trading at $85.07, up $2.43 (2.9%). The chart for NYX looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $65 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 a 4.2% return in just 2 months as long as NYX is above $65 at December expiration. NYSE would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.

NYX hasn't been below $65 by more than a few cents in the past year and has shown support around $80 recently. This trade could be risky if the company's earnings (due out on 11/2) disappoint, but even if that happens, this position could be protected by the increase in demand for shares as well as strong support around $70, where the stock bounced in September.

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

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