Skip to content
GetProfitable
Search
Dictionary

Notional exposure

The full market value of the currency you control, as opposed to the margin posted for it; the number that determines how much you actually make or lose per pip.

Notional exposure sums the market value each position represents: shares times price, contracts times price times multiplier, options times delta times 100 times the underlying price.

It reveals leverage that account balances hide. Four ES contracts at 5,000 are $1,000,000 of index exposure, which on a $120,000 account is 8.3:1 no matter how comfortable the margin looks. Ten zero-dte options might cost $900 in premium and represent $400,000 of delta-equivalent exposure for a few hours.

Track it daily as a single number and as a percentage of equity. Combined with beta-weighted-delta, it answers the only question that matters in a crash: if everything gaps 5% against me overnight, what happens to my account?

Related: gross-exposure, notional-sizing, leverage-ratio, beta-weighted-delta

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

How a call option's delta changes with the underlying priceAn S-shaped curve rising from zero, passing through about a half at the strike, and flattening near one.Delta of a call option1.000.5008090110120Out of the moneyAt the moneyIn the money1.00 means it moves one-for-one with the stockdelta ≈ 0.50 at the strikeStrike 100Underlying price
Delta across the range of prices. Delta says how much a call's price moves for a one-point move in the stock. Far below the strike it is near 0 and the option barely reacts; at the strike it is about 0.50; far above it approaches 1 and tracks the stock.
Margin and leverageA small deposit controlling a much larger position, and the point at which losses trigger a margin call.Position you controlnotional value $100,000your margin deposit: $5,000$100,000 / $5,000 = 20:1 leverageYour deposit absorbs every dollar of loss$5,000$2,500$0Equity leftMARGIN CALLequity has fallen to $2,5000%1%2%2.5%3%4%5%How far the price moves against you
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.

Educational only, not advice. Spotted an error? Post in Site Feedback.