Notional Value
The full economic exposure of a futures position: Futures Price × Contract Multiplier (or Contract Size).
Formula
Notional Value = Futures Price × Contract Multiplier
Notional value is the total market value of the underlying asset controlled by a futures contract. It reveals the true economic exposure — not just the margin posted — and is central to leverage and risk calculations.
Because futures are margined instruments, a trader may post only 2–10% of notional as margin while holding the full notional exposure. This built-in leverage is the key feature — and key danger — of futures trading.
Example
ES at 5,400: notional = 5,400 × $50 = $270,000. If initial margin is $15,000, the leverage ratio is 270,000 / 15,000 = 18:1. A 1% move in the index ($2,700) equals 18% of the margin posted.
Related Terms
Contract Multiplier
The dollar amount assigned to each index point (or unit) of a futures contract, converting price moves into P&L.
BeginnerContract Size
The fixed quantity of the underlying asset controlled by one futures contract, set by the exchange.
BeginnerDerivative
A financial contract whose value is derived from the price of an underlying asset such as a stock, index, commodity, or currency.
IntermediateFutures Contract
A standardized, exchange-traded agreement to buy or sell an asset at a fixed price on a set future date, settled daily via mark-to-market.
BeginnerInitial Margin
The minimum deposit required to open one futures contract, set by the exchange clearing house (CME, CBOT, NYMEX).
BeginnerLeverage (Futures)
The ratio of a futures contract's full notional exposure to the margin posted, amplifying both gains and losses on the capital committed.
IntermediateLong Futures
Buying a futures contract — agreeing to take delivery (or cash settlement) at expiry, and profiting as the price rises.
BeginnerSwap
An OTC derivative in which two parties exchange streams of cash flows over time, such as fixed-for-floating interest payments.
Advanced