Shares of Microsoft have slid powerfully over the past week alongside the market as a whole. But one trader appears to be betting on a long-term rally for the tech giant.
In a multimillion-dollar move, one trader bought 10,000 January 2017 45/55 call spreads for $2.60 per share. This is a trade that will make money if Microsoft shares rise above $47.60 by January 2017.
Microsoft's stock has been rather disappointing even before the past few days of selling.
Brian Stutland of Equity Armor Investments points out that the stock has remained well-ensconced between $40 and $50 for the past year, a range that Microsoft moved powerfully to the lower end of on Tuesday, when it closed at $40.47.
This appears to be a bet that the stock will eventually break to the upside—though likely not rise much higher than $55. Still, that would be a nearly 40 percent rally for the tech stock over the next 17 months.
Since each options contract controls 100 shares of stock, this is a $2.6 million trade.
Read More The volatility surge could signal it's time to buy
"A trade like this, where you bet on 20 percent to the upside, certainly has a good chance of paying off here," Stutland said Tuesday on CNBC's "Fast Money."
Given the massive volatility in stocks, so-called "stock replacement" strategies—which allow a trader to capitalize on upside while limiting downside—may now be wise, according to Stutland.
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