Trader Buys Massive Amount of U.S. Stock Call Options Hours Before Ceasefire, Netting $23 Million in a Single Day
On the morning of April 7 ET, a mysterious trader spent $12 million to buy 6,800 S&P 500 call options, betting on a 400-point rally in the index within the month. At the time, there was no positive news in the market, and Trump had even set a deadline for military action. Following the announcement of a ceasefire agreement, the S&P 500 surged 2.5% on Wednesday. The option premium soared from 17.65 points to 50 points, with the market value reaching $35 million, resulting in a single-day paper profit of approximately $23 million
Mysterious trader takes a heavy position in S&P call options hours before a ceasefire, netting $23 million in intraday unrealized gains.
According to Bloomberg, at 10:20 AM ET on Tuesday, April 7, an unidentified trader purchased 6,800 S&P 500 call options with a strike price of 6950 and an expiration date of May 8, for a premium of approximately $12 million.
At the time, the S&P 500 was trading at 6,556.21 points, representing a bet that the index would surge nearly 400 points within the next month, even as the market had yet to receive any major positive news.
Wallstreetcn even mentioned that Trump had set a deadline of 8:00 PM ET on April 7. Reports indicated that a plan for joint large-scale bombing of Iranian energy facilities by the U.S. and Israel was ready, awaiting Trump's order.
As Trump announced a two-week ceasefire agreement, the S&P 500 surged 2.5% on Wednesday, closing at 6,782 points.
Although the S&P 500's current level of 6,782 remains 168 points away from the 6,950 strike price, the trader's massive profit stems from the surge in the option's "premium."
The market price of the 6,950 call option has soared from approximately 17.65 points at the time of purchase ($12 million ÷ 6,800 contracts ÷ $100 per point) to 50 points, meaning the market value of the position has reached approximately $35 million.
After deducting the initial cost of $12 million, the net paper profit is approximately $23 million.
Even if the S&P 500 fails to break 6,950, as long as market sentiment and implied volatility spike due to sudden events, the price of a deep out-of-the-money option can jump significantly due to a "re-evaluation of possibilities."
According to Chris Murphy, co-head of derivatives strategy at Bloomberg, in an email on Tuesday, this trade is a "classic example of chasing the upside on expectations that a peace deal would be reached."
