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This is a continuation of a theme I have been writing about this year involving stock options referred to as naked puts.

This allows investors to take a position in a stock, most often below its current price, but depending on market sentiment. That sentiment remains relatively negative so the spreads are attractive.

I have been following BHP Billiton Ltd ADR (NYSE: BHP) the largest mining company in the world, with headquarters in Australia, for a while but I do not own the stock today. I view all mining companies as an opportunity because I think the diversified raw materials they control are the best hedge against inflation. I do not think inflation is imminent, but with the extreme increases in money supply and debt being created I do not think it will be avoidable a few years out.

It was reported on Sunday, June 21, that Anglo-Swiss mining company Xstrata has proposed a merger of equals to the board of Anglo American ADR (NASDAQ: AAUK), hoping to create a new, more competitive mining giant. Rumors have been milling about for a while.

Together, Anglo American and Xstrata would have a market capitalization of approximately $68 billion, (AAUK's $35 billion + XTA.L's $33 billion) and be larger than Rio Tinto plc ADS (NYSE: RTP), which ended the trading day last Friday with a capitalization hovering over $42 billion.

Rio Tinto (NYSE: RTP - option chain) stock is declining this morning on reports that Chinese authorities could use a new antitrust law to block the company's planned joint venture with BHP Billiton (NYSE: BHP). 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 RTP.

This morning, RTP opened at $193.00. So far today the stock has hit a low of $188.52 and a high of $194.00. As of 11:45, RTP is trading at $190.15, down $14.29 (-7.0%). The chart for RTP looks neutral and S&P gives RTP a neutral 3 STARS (out of 5) hold ranking.

It was certainly a big-time bet: Chinalco agreed to invest a whopping $19.5 billion in Rio Tinto (NYSE: RTP), which is the #3 ore miner. However, over the past couple months, there was some doubt as to whether this transaction would come to fruition.

Well, this week, we got an answer. That is, Rio decided to dump Chinalco and instead form a joint venture (JV) with BHP Billiton (NYSE: BHP), which is the #2 player in the global ore industry (keep in mind that both firms had a buyout deal that blew up last year).

Now, the JV has lots of merit. For example, there will be huge cost synergies, which could amount to more than $10 billion.

TheStreet.com's Jim Cramer says you may hear reasons why the rally shouldn't have occurred, but you can't deny it did happen.

On Tuesday I wanted to shoot myself, as always when I woke up and went online to see what was going on. Here's a partial list of the beautiful data points that were in my purview in the first hour of looking over the market:

1. A trenchant note from a major strategist at a bank I trust who is talking about why the market must be avoided because private-equity valuations are collapsing, so what's the point of owning equities.

The whole world watches China when it comes to the natural resource play. Iron ore and steel companies have watched their share prices swing wildly based on news coming out of the Middle Kingdom in terms of what Chinese mills will be buying and how much they are willing to pay (particularly for the annual iron ore negotiations). Of late, the steel and iron sector has bounced nicely based on rising Chinese demand. Now noises coming out of China's government imply the steel bounce might have been inflated demand numbers. (via FT Alphaville).

Analyst upgrades:

• Stephens upgraded Arris (NASDAQ: ARRS) to Overweight from Equal Weight following the company's Q1 results and raised its target on shares to $15 from $8.
  
• Goldman upgraded Goodyear Tire (NYSE: GT) to Neutral from Sell and raised their target to $11 from $7 citing better earnings prospects and stabilizing volumes.
  
• KeyBanc upgraded Parkway Properties (NYSE: PKY) to Hold from Underweight citing the company's improved balance sheet and valuation.
• Digital River (NASDAQ: DRIV) was raised to Perform from Underperform at Oppenheimer.
  
• Barclays (NYSE: BCS) was raised to Buy from Sell at Royal Bank of Scotland.
  
• First Potomac (NYSE: FPO) was upgraded at RBC Capital to Sector Perform from Underperform.

While stocks listed on the over-the-counter bulletin board (OTCBB) and the Pink Sheets, a privately held daily quote service (not a stock exchange), are known to be lacking in SEC filings, liquidity, and easily obtainable financial information (some have been delisted from major exchanges so brokerages actually make customers sign additional forms recognizing the added risk if they choose to trade in this niche), they actually are fully audited. In the last few years, Pink OTC Markets Inc., which owns these quotation systems, has aimed to bring extended transparency to this little known niche through the introduction of OTCQX.

The OTCQX, now a few years old and with 55 stocks listed, is a premium area of Pink Sheets -- which is littered with over 9,000 companies, most of which are penny stocks that don't trade very many shares or very often -- that provides a new level of disclosure not required outside of any major stock exchange, such as the AMEX, NYSE, or NASDAQ.

Let's look at the explosive jump in the price of copper, and then examine the underlying factors that could signal the beginning of a sell off:

• From December 24, 2008 to April 3, 2009, copper rallied 51%.
• Global stockpiles tripled to about 567,000 tons since July.
• Hedge funds and other large speculators increased their net short positions in New York copper futures by .6% in the week ended March 31.
• Prices have been rising because of China's buying for stockpiles.
• Beijing's State Reserve Bureau (SRB) took advantage of the declines in 2008 and agreed to buy 300,000 to 400,000 tons. China may increase its stockpile to 936,000 tons in 2009.
• Jose Pablo Arellana, CEO of Santiago, Chile-based Codeleo, the world's biggest copper miner, said the December lows are "in the past" and Chinese demand rebounds.
• The 82-member Bloomberg world mining index led by BHP Billiton Ltd (NYSE: BHP) plunged 56% in the twelve months through April 3.
• Peter Sorrento, who manages Huntington Asset Advisor, said: "we think we could see a pretty significant sell off in the next quarter."
• A Bloomberg survey of 13 analysts estimates that copper will average $3,000.00 a ton this quarter, 21% below the April 3 closing price of $4,301.00 per ton.
• Copper and home building tend to go together. With confidence among U.S. home builders near record lows in March, there isn't much to spur the copper market much further to the upside.

TheStreet.com's Jim Cramer says if you don't want to wait for a pullback, look abroad for the next leg or find values at home.

What do you do when everyone knows we have come up too far, too fast; no one knows who is actually buying; and we are going into earnings season?

What do you do when the animal spirits are taking up the market and yet other than a handful companies -- Research In Motion (NASDAQ: RIMM) (Cramer's Take), Xilinx (NASDAQ: XLNX) (Cramer's Take), Corning (NYSE: GLW) (Cramer's Take), Best Buy (NYSE: BBY) (Cramer's Take) and Taiwan Semi (NYSE: TSM) (Cramer's Take) -- almost all companies that have spoken during the "off-season" earnings reports have been dismal?

Analyst upgrades:

• Morgan Stanley upgraded CNOOC Ltd (NYSE: CEO) to Equal Weight from Underweight to reflect higher crude oil price estimates.
  
• Goldman upgraded VMware (NYSE: VMW) to Conviction Buy from Neutral and raised its target to $29 from $27 following positive checks that indicate strong business actively. The analyst expects VMW's revenue growth to be up 9% in 2009 vs. expectations for overall IT spending to be down.
  
• UBS upgraded ON Semiconductor (NASDAQ: ONNN) to Buy from Neutral and raised its target to $5 from $3.80 based on positive Asia checks that indicate an improving demand outlook and that the company could beat near-term expectations.
• Vodafone (NYSE: VOD) was lifted to Buy from Neutral at Goldman and to Overweight from Equal Weight at Morgan Stanley.
  
• Ashland (NYSE: ASH) was raised to Overweight from Neutral at JP Morgan.

Analyst upgrades:

• Citigroup upgraded shares of Corning (NYSE: GLW) to Buy from Hold as it believes LCD glass production and sales have bottomed and will pick-up in Q2. The firm raised its target price to $16 from $11.25.
  
• Thomas Weisel upgraded Celera (NASDAQ: CRA) to Overweight from Market Weight based on valuation and its strong business model.
  
• ThinkEquity upgraded Varian Semi (NASDAQ: VARI) to Buy from Accumulate and raised its target to $32 from $20 based on valuation and weakness at its sole competitor.
• Sanofi-Aventis (NYSE: SNY) was upgraded to Hold from Underperform at Jefferies.
  
• Agilent (NYSE: A) was raised to Outperform from Neutral at Credit Suisse.
  
• Liberty Interactive (NASDAQ: LINTA) was upgraded at JP Morgan to Neutral from Underweight.

TheStreet.com's Jim Cramer says this market is short-term overbought -- any other reasons to buy can wait.

The playbook says, "Buy weak-dollar plays." But does that mean only weak-dollar commodity plays, as in flee-out-of-dollar-into-oil plays? Or weak-dollar plays like Johnson & Johnson (NYSE: JNJ) (Cramer's Take) and General Mills (NYSE: GIS) (Cramer's Take)? Or weak-dollar plays like gold? Or tech plays because Intel (NASDAQ: INTC) (Cramer's Take) and Hewlett-Packard (NYSE: HPQ) (Cramer's Take) are hugely international?

Or do you bother doing anything at all up here because we are plus-seven on the oscillator and every time we have gotten this overbought in this market, we have come crashing down?

Analyst upgrades:

• Jefferies upgraded NeuStar (NYSE:NSR) to Hold from Underperform on valuation following the recent weakness and raised their target price to $15 from $12.
  
• Oppenheimer upgraded Adobe Systems (NASDAQ:ADBE) to Outperform from Perform on valuation as they believe the recent pullback has created an attractive entry point into the name. The firm has a $27 target on the stock.
  
• UBS upgraded Pfizer (NYSE:PFE) and Wyeth (NYSE:WYE) to Buy from Neutral based on valuations. Pfizer's price target remains $18 and Wyeth's was raised to $50 from $38.
• Methanex (NASDAQ:MEOH) was upgraded to Sector Outperformer from Sector Performer at CIBC.
  
• BHP Billiton (NYSE:BHP) was raised to Buy from Hold at RBS.
  
• Anadys Pharma (NASDAQ:ANDS) was upgraded to Buy from Neutral at Piper Jaffray.

Abercrombie & Fitch (NYSE: ANF) closed at $18.49. ANF is expected to report Q4 EPS on February 13. ANF February option implied volatility is at 87, March is at 84; above its 26-week average of 67, according to Track Data, suggesting larger price movement.

FedEx (NYSE: FDX) closed at $49.15. FDX is expected to report Q3 EPS in March. FDX February option implied volatility is at 54, March is at 60; above its 26-week average of 51, according to Track Data, suggesting larger movement.