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Notional value

The full market value of what a position controls, regardless of how much cash was put up to hold it.

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.

Notional value is contract size times price. It is the number that tells you your true exposure. A leveraged position can have a small margin requirement but a very large notional value.

Traders who size by margin instead of notional are the ones who get surprised. A 1% move happens to the notional, not to the margin.

Example: one es contract at 5,000 has a notional of $50 x 5,000 = $250,000. If the day-trading-margin is $500, a 1% adverse move (50 points, $2,500) is five times the margin you posted.

Related: contract, leverage, margin, futures-contract

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