Amaranth Advisors
Amaranth Advisors Natural Gas Losses
Estimated impact: $6.6B
Multi-strategy hedge fund Amaranth lost $6.6B in a single week on leveraged natural gas futures positions. Trader Brian Hunter had accumulated positions that exceeded the fund's total capital, and risk limits were repeatedly raised to accommodate his growing bets.
Decision context
Whether to enforce position limits on natural gas trades or continue raising limits as the trader's positions grew larger and the fund became increasingly concentrated.
Biases present in the decision
Toxic combinations
- Recency Spiral
- Yes Committee
- Doubling Down
Reference class base rates
Across all 146 curated case studies in our library:
Lessons learned
- Recency bias from Hunter's prior profitable natural gas trades led to risk limit increases rather than enforcement
- Position concentration in illiquid commodity futures creates liquidity risk that cannot be hedged during a crisis
- When a single trader generates the majority of fund profits, authority bias makes risk managers reluctant to constrain them
Source: U.S. Senate Permanent Subcommittee on Investigations, "Excessive Speculation in the Natural Gas Market" (2007) (Case Study)
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