Options & derivatives
Notional value
The total value of the underlying asset a derivative contract controls.
How it works
A futures contract requiring a few thousand in margin can have a notional value of a hundred thousand. The notional is the exposure; the margin is only the deposit.
Measuring position size by margin posted rather than by notional is how portfolios end up far more leveraged than their owners believe.
Related terms
- LeverageUsing borrowed money to increase exposure beyond what your own capital would buy.
- Futures contractA standardised, exchange-traded agreement to buy or sell something at a set price on a future date.
- MarginBorrowing from your broker to buy more than your cash allows, using your portfolio as collateral.
- DerivativeA contract whose value comes from the price of something else.
More in Options & derivatives
- Option
- Intrinsic value (options)
- Option spread
- In the money
- Premium
- Implied volatility
- Protective put
- Gamma
All 30 Options & derivatives terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.