Amaranth Held Seventy-Five Percent of America's November Gas Contracts.

•  One fund became the American natural gas market

•  It held five percent of a year's gas

•  A position limit applied on one exchange only

•  Eight billion dollars was wound down in weeks

The March 2027 natural gas contract settled at $2.782 on Monday and the April 2027 contract at $2.680, a gap of about ten cents. That distance between the last month of winter and the first month of spring is one of the most heavily traded relationships in American energy.

In the summer of 2006 the same gap reached nearly $2.50, and one fund was on one side of it. Amaranth Advisors ran about $8 billion and was among the largest participants in the natural gas market. Its energy book bought winter contracts and sold summer contracts, and for the first four months of that year the trade worked.

What made it look safe was that each leg stood against the other. Nothing in it was a view on the price of gas. It was a view on the distance between two dates, and a spread is the position every risk desk treats as the careful one.

Every row below comes from one document, the staff report of the Senate Permanent Subcommittee on Investigations, published on June 25, 2007. The Subcommittee subpoenaed the trading records of both exchanges and of the fund itself and read several million individual trades. It is an account of that summer built from the trades rather than from the price.

Look at the instruction. The New York exchange examines any trader whose position passes 12,000 contracts in a single month, and it asked the fund to reduce two of them. The fund reduced them there and increased them on the other venue within days. The overall size never changed, and nothing in the instruction required that it should.

Four things decided how this ended, and not one of them was the price of gas.

•  The size was the market. A trader becomes reportable at 200 contracts. This book held as many as 100,000 in a single month, about one trillion cubic feet, or five percent of everything the United States burns in a year.

•  One cent was ten million dollars. A single contract covers 10,000 million British thermal units, so across a hundred thousand of them a one cent move is ten million dollars. At that size leaving is not a decision, it is a negotiation.

•  The limit had an edge. Position ceilings applied on the New York exchange. The other venue carried none, and New York had no routine sight of what a trader held there. A ceiling on one board is not a ceiling on a position.

•  Nothing was wrong with the gas. Supply was plentiful and storage ran above average all summer. The prices were moving because of one book, not because of the weather or the wells.

The fund's own capital went first. From the last week of August to the middle of September the natural gas positions moved against it by more than two billion dollars, and the entire $8 billion portfolio was handed over and wound down.

Everyone buying gas that summer for winter delivery paid the wider gap. Utilities either absorbed it or passed it to the households behind them, and the American gas bill across every sector came to roughly $205 billion the year before.

Then it went the other way. The spot price at Henry Hub fell from $7.49 in late August to $3.66 in early October, the lowest in four years, and the March to April gap came down by three quarters. Anyone hedged at the summer level paid for that as well.

•  Ask what fraction of the market you are. A holding is liquid only relative to everyone else in it. Five percent of a nation's annual consumption is not a position, it is the market.

•  A spread is still a size. Setting one leg against another controls direction and never scale. The two legs move apart at exactly the moment you need them together.

•  Read where the rule stops. A ceiling that binds on one venue and not on the next one is a ceiling on paperwork.

•  Watch prices that move with nothing behind them. When supply, storage and weather hold steady and the price does not, somebody in that market is the reason.

I stood in a pit where the man with the largest position was always the last one out, and the floor knew it before he did.

Ask of anything you own: how long would it take to sell all of it, and to whom - a question with a short answer when the thing is a bar of gold in a vault.