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Amaranth Advisors: the $6 billion natural gas wipeout

In September 2006, a $9 billion hedge fund lost about two-thirds of its money in roughly two weeks. Almost all of it came from one market: natural gas.

Story · 7-minute read · Updated 2026-10-21

Who they were

Amaranth Advisors was a hedge fund based in Greenwich, Connecticut. Nicholas Maounis started it in 2000.

It began as a "multi-strategy" fund, spreading its money across many kinds of trades. Over time, more and more of its risk ended up in one place: energy.

The energy trading was led by Brian Hunter, a Canadian natural gas trader in his early thirties. In 2005, after hurricanes Katrina and Rita hit gas production in the Gulf of Mexico, his bets paid off in a big way. By most accounts, he made the fund around $1 billion that year.

That success gave him more room, and more money, to trade.

What happened

Hunter's main bets weren't simple "gas goes up" or "gas goes down" trades. They were bets on the gap between prices for different months.

Natural gas futures contracts exist for each future month. Winter gas usually costs more than spring gas, because people heat their homes in winter. Hunter bet, in large size, that the gap between some winter and spring months would stay wide or get wider.

The positions got enormous. A 2007 US Senate investigation found that, at times, Amaranth held a very large share of all the open contracts for some winter months on the main US exchange. It said the fund's trading was big enough to move prices.

Here's why that matters. When you're that big in one market, you are the market. There's no one large enough to sell to when you want out.

The moment everyone remembers

In late summer 2006, the weather was mild, storage tanks were full, and no big hurricane hit. The winter-spring gap that Hunter had bet on started to shrink.

Each move against him cost huge sums, because the positions were so large. And the rest of the market could see a giant player was stuck.

In mid-September 2006, the losses snowballed. In about two weeks the fund lost roughly $6 billion, about 65% of its money.

On 20 September 2006, Amaranth sold its energy positions to JPMorgan and Citadel to stop the bleeding. Days later it told investors it would close down.

What happened next

The regulators came next.

• July 2007: The CFTC sued Amaranth and Hunter, alleging attempted manipulation of natural gas futures prices on certain days in early 2006.
• 2007: FERC, the energy regulator, brought its own case and later fined Hunter $30 million.
• August 2009: Amaranth's companies settled with the CFTC and FERC for a combined $7.5 million, without admitting or denying the claims.
• March 2013: A US appeals court threw out FERC's $30 million fine, ruling that futures trading on a CFTC-regulated exchange belongs to the CFTC, not FERC.
• 2014: Hunter settled the CFTC case. He paid a $750,000 fine and accepted a ban on trading CFTC-regulated natural gas products, neither admitting nor denying the claims.

What it teaches

1. One market should never be the whole story

Amaranth said it was diversified. In practice, its fate rested on one trader in one market.

For a normal trader, the fix is a cap on each trade and on each market. Risk a small slice, around 1% per trade, and don't stack several trades on the same idea. See how much to risk per trade.

2. Size decides whether you can get out

A stop only works if someone will take the other side of your order. Amaranth's positions were so large that there wasn't.

At normal sizes in busy markets, that's rarely a problem. But it's why we prefer liquid markets and avoid thin ones near the edges of the day. More in liquidity and slippage.

3. A great year makes the next risk look smaller

Hunter's 2005 gains bought him more trust and more room. The next big bet was larger.

That's a common trap at any size. Read overconfidence in trading, and keep your size rule fixed after good months too.

4. Natural gas moves fast

Gas is known as one of the most jumpy markets there is, swinging with weather, storage reports and storms. Our natural gas futures guide covers what moves it. Check what each tick is worth with the futures tick value calculator before you size anything.

What it doesn't mean

• It doesn't mean natural gas can't be traded sensibly. Many hedgers and traders use it every day with modest size.
• It doesn't mean the regulators proved manipulation in court. The cases ended in settlements without admissions, and FERC's fine was overturned. That's the documented outcome.
• It doesn't mean spread trades are "safe". They're often described that way. Amaranth shows a spread can lose as much as any one-way bet when it's big enough.
• Hunter's 2005 year isn't a model to copy. It came with risk large enough to end the fund the next year.

Timeline

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