Basically Futures

STAGE 1 · LESSON 4 OF 5

Margin, notional value, and leverage

Futures margin is a performance bond, not the maximum amount a trade can lose.

THE IDEA~8–12 MINUTES

Understand it

Notional value is the contract multiplier times the underlying price. Required margin may be a small fraction of that exposure and may change with volatility or broker policy. Accounts are marked to market; losses can trigger margin calls or liquidation. Stops can be filled worse than expected, and futures losses can exceed funds deposited. Calculate notional and stop risk separately.

WORKED EXAMPLE

At a hypothetical ES index level of 6,000, one contract has $300,000 of notional exposure (6,000 × $50). A broker may require much less in margin. Neither figure sets the final loss on a trade.

Watch for this misconception

Assuming that because a broker allows a position, it must fit a sensible trading risk budget.

PRACTICE EXERCISE

Write down three different numbers for a sample trade: notional exposure, broker margin requirement, and planned stop exposure.

Position-size calculator ↗
KNOWLEDGE CHECK

Which statement about margin is accurate?

Select the best answer

Check the sources

Hypothetical educational examples. Verify current product specifications and rules before making decisions.