Trader bets on possible new highs for Microsoft

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Options Action: Bullish bets on Microsoft

Microsoft shares have rallied 11 percent in the past three months, and according to one savvy trader the run is far from over.

On Monday, when bullish trades outpaced bearish ones, a trader bet Microsoft could rally another 5 percent post- earnings on Friday.

In the wager, the trader purchased 4,500 May 59/61.50 call spreads for 30 cents each. A call spread is a bullish strategy where a trader will buy a call and then sell a higher strike call to offset the cost. The goal is for the stock to rise to the strike you are short, or in this case as high as $61.50 by May expiration.

"If you look at the 20-year chart, the highs on Y2K was [around] $59.97. ... If this trader is right you're going to have very close to a new all-time high," Dan Nathan of RiskReversal.com said Monday on CNBC's "Fast Money. "

Microsoft will release its fiscal third-quarter earnings report Thursday after the bell. Nathan noted that the options market is implying a 5 percent one-day post-earnings move. In the last four quarters, the average post-earnings move was 7.5 percent, with two 10 percent rallies.

"I think if you're playing for a move like that you want to define your risk. Options premiums look pretty reasonable on Thursday after the close," said Nathan.

Analysts are estimating earnings of 64 cents per share, with a revenue estimate of $22.1 billion according to FactSet.

Microsoft shares were down slightly on Tuesday, but are still up 3 percent so far this week.