A quantitative type of trader would have probably backtested
the winter-summer spread strategy and found that it produced
significant excess returns historically and might have used
this as a basis to make such a trade going forward. However,
it is difficult to determine if Amaranth’s traders had based
their strategy on a similar motivation. It is somewhat reassuring
to find that the Amaranth strategy generated positive average
returns historically. However, in my opinion, the traders were
not relying on statistical techniques, but rather were using their
instincts and experience in natural gas futures which was
conditioned by this historical pattern. Their view was also
influenced by their beliefs about the demand and supply of
natural gas in 2006. Interviews with Amaranth traders revealed
that they believed that winter natural gas prices would rise