Some of our traders ask us, "What is Notional Value?
Notional value is the total dollar amount of a futures contract that you are controlling. Think of it as the “real-world” value of the asset.
To calculate it, use this simple formula:
Notional Value = Current Market Price X Contract Multiplier Point Value
Why does it matter?
This number shows your actual market exposure. The key insight for new traders is that you don’t need the full notional value to open a position—you only deposit a small “margin” (often as low as 1% to 5% of the total). However, your profit or loss is calculated based on the full notional value, not just your deposit.
Example: If the S&P 500 is at 5,000, one Micro S&P (MES) contract has a Notional Value of $25,000 ($5 multiplier x 5,000 price). Even if your day-trading margin is only $50, you are controlling $25,000 worth of stock.
The Risk: A 1% move against that $25,000 represents a $250 swing. If you only have $500 in your account, one bad 1% move wipes out half your capital, even though you “only” traded one micro contract.
Bottom Line: A small margin requirement does not mean small risk. The notional value is what determines your actual exposure to the market’s volatility.
Contract Value Reference Table
The “Point Value” (multiplier) stays the same; what changes is the market price. Use this table to understand exactly how much leverage you are controlling with each “click.”
| Contract (Standard) | Point Value | Tick Size | Tick Value | Micro Equivalent | Micro Point Value | Micro Tick Value |
|---|---|---|---|---|---|---|
| S&P 500 (ES) | $50.00 | 0.25 | $12.50 | MES | $5.00 | $1.25 |
| Nasdaq 100 (NQ) | $20.00 | 0.25 | $5.00 | MNQ | $2.00 | $0.50 |
| Dow Jones (YM) | $5.00 | 1.00 | $5.00 | MYM | $0.50 | $0.50 |
| Russell 2000 (RTY) | $50.00 | 0.10 | $5.00 | M2K | $5.00 | $0.50 |
| Gold (GC) | $100.00 | 0.10 | $10.00 | MGC | $10.00 | $1.00 |
| Crude Oil (CL) | $1,000.00 | 0.01 | $10.00 | MCL | $100.00 | $1.00 |
You should use the Point Value, not the Tick Value when calculating notional amounts/
Using this for Risk Management
Beginners are often drawn to leverage, but the goal is longevity. Before you enter a trade, ask yourself:
- “What is the total Notional Value I’m controlling?”
- “How many contracts can I realistically handle if the market moves 1% against me?”
Pay attention to both the point value and the contract’s specific volatility. Trading one Crude Oil (CL) contract is a vastly different financial commitment than trading one Micro Dow (MYM), even if the margins look similar.
Know what is at stake before you “open the door.”
Best,
Matt Z
www.optimusfutures.com