Futures Let You Trade a Full Contract for Only a Fraction of Its Value
Futures are a leveraged product: instead of putting up the full notional value of a contract, you only deposit a margin, a fraction of that value, to open a position. Initial margin is what you need to enter a new trade, and it's set by multiplying the notional value by the margin rate. Notional value itself comes from the contract price multiplied by the contract multiplier (the dollar value one point represents) and the number of contracts. Because a small deposit controls a much larger position, gains and losses are amplified too, so knowing your required margin before you enter a trade matters.
How It's Calculated
| Item | Formula |
|---|---|
| Notional value | Contract price x multiplier x contracts |
| Initial margin | Notional value x margin rate |
For example, a price of 4,500, a $50 multiplier, 1 contract, and a 10% margin rate gives a notional value of $225,000, so the required initial margin is $22,500. Actual margin rates and multipliers vary by product, exchange, and volatility, so check the contract specifications before trading. Also keep in mind that if losses push your balance below the maintenance margin, you may face a margin call, so it's safer to keep extra cash on hand beyond just the initial margin.
Frequently Asked Questions
Notional value (price x multiplier x contracts) times the margin rate. 4,500, $50 multiplier, 1 contract, 10% margin gives $22,500.
Initial margin opens a position, maintenance margin keeps it open. Falling below maintenance triggers a margin call.
The dollar value one point of price movement represents per contract. It varies by product, so check the contract specifications.
* Margin rates and multipliers vary by exchange, product, and market conditions; estimate for reference only.