Amaranth a hedge fund appears to be living up to its reality and dying shortly after conception. This fund originally traded grains and then equities and decided that commodity trading would produce better returns. In two days they had to unwind a position and cement $6bn of losses. This sum of money is tripped off as normal but is the largest single trading loss ever, it dwarfs Long Term Capital Management by a further $2bn and lies directly at the foot of one trader. The terms of the actual trade suggest that Amaranth had bought October relative to December. The recent collapse in the market has seen a curve shift but also a flattening of the curve, something which traditionally does not happen, but as any commodities trader will tell you, history is not necessarily a good guide for the future. Last year the effect of the rise between October and December was exagerated due to the hurricane season. In effect Amaranths trade was a punt on hurrricanes occuring. The use of the word punt is meant because it is staggering that risk managers and traders were not aware of the risks. Rumour suggests that the fund was $800m to the good, (which given $12bn worth of assets may not seem that good, 7% return) so to lose this level of money the size of the trades would have dwarfed the market, players (almost everyone) would have been holding the other side of the trade and one suspects that like a big game of poker a big bet the other way forced Amaranth to blink. Whatever the reason the fund is being wound up, some of the banks will take on some of the positions and Brian Hunter the trader will be asked to perform on the Nick Leeson lecture tour circuit.