NYMEX contracts on 10,000 MMBtu of natural gas delivered at Henry Hub, Louisiana, with a $0.001 tick worth $10 and famously violent price behaviour.
Gas is hard to store and hard to move, so its price is far more volatile than oil. A single cold forecast revision can move the front month 10% in a session, and daily ranges that would be extraordinary in crude are routine here.
The market is intensely seasonal: gas is injected into storage from April to October and withdrawn from November to March. That cycle dominates the forward-curve and creates the widow-maker-spread between March and April.
Because one contract is 10,000 MMBtu, a $0.10 move is $1,000 — a large number relative to typical margin, which is why gas destroys more accounts per contract traded than almost anything else on the board.
Example: gas at $3.20 gives a notional of $32,000 per contract. A 7% day is $0.22, or $2,200 per contract, against initial margin that might be around $3,500.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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