Counterintuitive high-stakes gamble! Mysterious trader bets on Netflix(NFLX.US)'s "failed acquisition," turning it into a positive. $14 million options strategy revealed.

Bloomberg News has learned that, according to options market data, a mysterious trader recently established a peculiar position worth nearly $14 million, betting that streaming giant Netflix (NFLX.US) could see its stock price rise even if it loses the bidding war for Warner Bros. Discovery (WBD.US).

Specifically, on Wednesday, the trader bought 55,000 May-expiring $90 call options on Netflix and sold an equal number of $105 call options, partially offsetting the premium cost. This options spread contract costs about $2.51 per unit, with total premiums paid amounting to $13.8 million. If Netflix’s stock price rises from the current $83 level, this strategy grants the holder the right to buy 5.5 million shares at a specific price.

In the background, Paramount’s PSKY.US proposed a new $31 per share acquisition offer on Tuesday, more competitive than Netflix’s previous agreement at $27.75 per share with Warner Bros.

Although Warner Bros. has not withdrawn its support for the Netflix acquisition plan, it acknowledged that Paramount’s latest bid has triggered further negotiations. Under the agreement, if Netflix’s bid fails, it will receive a breakup fee of $2.8 billion.

This news caused Netflix’s stock to surge 6% on Wednesday, the largest single-day gain since April. JonesTrading event-driven strategist noted that the cleverness of this options position is that if Paramount ultimately wins, it could trigger a rebound in Netflix’s stock price.

Assuming Netflix’s stock rises 30% before the May 15 expiration, the maximum theoretical profit of this position could reach $68 million; even a moderate increase in implied volatility could allow traders to take profits.

Water Island Capital merger arbitrage fund manager said this indicates some investors expect Netflix might choose to terminate the deal proactively. Notably, Politico reported that Netflix CEO Sarandos will visit the White House on Thursday to discuss the acquisition, which the market interprets as a signal that “Netflix may not have completely given up on raising the bid.”