An unidentified trader made a massive bet on S&P 500 call options just hours before a ceasefire was announced, generating a paper profit of $23 million in a single day.

On Tuesday, April 7, at 10:20 AM Eastern Time, the trader purchased 6,800 call options on the S&P 500 index with a strike price of 6,950 and an expiration date of May 8. The premium paid for the position was approximately $12 million.

At the time of the trade, the S&P 500 was trading at 6,556.21 points, meaning the trader was betting the index would surge nearly 400 points within a month. No major positive news had emerged in the market at that point.

Later that day, a ceasefire agreement was announced. On Wednesday, the S&P 500 index jumped 2.5%, closing at 6,782 points.

Although the index remains 168 points below the 6,950 strike price, the trader's substantial profit stems from a sharp increase in the option's premium. The market price of the 6,950 call option surged from approximately 17.65 points at the time of purchase to 50 points. This increase raised the market value of the option position to around $35 million.

After deducting the initial $12 million cost, the paper net profit amounts to roughly $23 million.

Even if the S&P 500 fails to reach the 6,950 strike price by expiration, the value of deep out-of-the-money options can still rise significantly due to a "reassessment of probability" if market sentiment and implied volatility spike following unexpected events.

According to a Tuesday email from Chris Murphy, co-head of derivative strategy, the trade is a "classic example of chasing upside momentum on expectations of a pending peace agreement."