This one works.
Original post:
As noted on Monday:
Since natural gas is, at least on the blog, untradable -up 9.6% on Friday, ranging between $5.44 and $4.83 today, today-we'll check in on some of the current craziness in natural gas liquids....From ZeroHedge (Wednesday):
Natural Gas futures prics are exploding higher... By now everyone is quite aware of the US climatic conditions so whatever squeeze just took place has nothing to do with fundamentals, and everything to do with someone being Amaranth'd. The only question is who, and who is their counterparty (especially if it is a public company).
March Futures
and Feb Futures
The last 3 days in NG is +9.6%, -6.5%, and today +10.4% - these are 5 sigma swings!!Much as I'd like to give the impression that natty is experiencing 5-sigma moves and that's why we stepped aside, ZeroHedge is incorrect.
As we learned when fact-checking Goldman's David Viniar back in August 2007:
“We were seeing things that were 25-standard deviation moves, several days in a row”....Several folks, when they finally quit laughing, pointed out how blatently Mr. V was spinning.
Most however underestimated how infrequent 25SD events are, the most common guess being once in 100,000 years. Tee hee.
In a snappy little eight page paper "How Unlucky is 25 Sigma" we see that at 7 Sigma the odds are:
• a 7-sigma event is to be expected every 7.76e+11 days – the number of zeroThe 5-sigma event:
digits is so large that Excel now reports the number of days using scientific
notation, and this number is to be interpreted as 7.76 days with decimal point
pushed back 11 places. This frequency corresponds to 1 day in 3,105,395,365
years....
• a 5-sigma event is to be expected every 3,483,046 days or about 1 day every
13,932 years(!!)
