Shares of



are up $0.17 to $37.75 Monday morning and helping lift the NASDAQ index beyond 4000 for the first time since the year 2000. The stock has performed well in 2013 and is now up 41.3% year-to-date. MSFT hit multi-year highs of $38.22 on November 6 and one player in the options market opened a sizeable position in options on the stock Friday that seems to be expressing confidence that MSFT will move beyond those highs over the next few weeks.

In afternoon trading Friday, a 20,000-contract block of December 38 calls traded on the software giant for $0.66 per contract on AMEX, when the market was $0.65-$0.66. At the end of the day, 32,830 December 38 calls traded on MSFT and the flow created 26,183 in new open interest. The contract is now $0.25, or .7%, out-of-the-money and expiring in 25 days.

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Interestingly, implied volatility in the options on MSFT has been creeping steadily higher along with the stock price in recent weeks. 30-day IV is up to 23.9%, from 17.4% on Nov 1, and now in the 85th percentile of the 52-week range (14.5 - 30). The increase is counter to the trend seen throughout much of the options market. For instance, CBOE Volatility Index(VIX) finished Friday at 12.26 and is down 10.8% month-to-date.

There are a few possible reasons why players are taking positions in December upside calls on MSFT and why implied volatility in the options on the stock is moving higher as well. The company reported this weekend that it sold 1 million Xbox One's on the first day of sales. Optimism for the upcoming holiday shopping season is perhaps one reason for the bullish sentiment.

More importantly, a new CEO has been a major focus for MSFT since Steve Ballmer announced plans to step down in August. It is believed that the Board has narrowed down its list of candidates and will announce something in the next few months. Obviously, the news will have important implications for the company and future initiatives to unlock shareholder value. For that reason, premiums (implied volatility) in MSFT is likely to remain elevated until the CEO search is complete.

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At the time of publication, Henry Schwartz held no positions in the stocks or issues mentioned.