I checked historically and NatGas near–next month spread is usually ~5–10%, max ~15–20% in extreme cases.
This time it’s close to 40%, which feels very unusual.
Is this just extreme winter tightness, or am I missing something?
Also, is there any practical way to capture this via arbitrage (Jan vs Feb), or are margins / liquidity making it unviable?
Well ,In theory arbitrage looks straightforward. but in practice, it’s not that simple.
Here , Common sense says selling the Jan futures and buying the Feb futures. But the real problem is volatility in the Jan contract. Jan Fut can remain extremely volatile and may spike another 10–20% before the spread eventually narrows.
Even if the trade is directionally correct, such sudden spikes can lead to large MTM losses triggering the margin calls.