Notional Value

AAA

DEFINITION of 'Notional Value'

The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets because a very small amount of invested money can control a large position (and have a large consequence for the trader).

INVESTOPEDIA EXPLAINS 'Notional Value'

For example, one S&P 500 Index futures contract obligates the buyer to 250 units of the S&P 500 Index. If the index is trading at $1,000, then the single futures contract is similar to investing $250,000 (250 x $1,000). Therefore, $250,000 is the notional value underlying the futures contract.

RELATED TERMS
  1. Notional Principal Amount

    In an interest rate swap, the predetermined dollar amounts on ...
  2. Open Interest

    1. The total number of options and/or futures contracts that ...
  3. Derivative

    A security whose price is dependent upon or derived from one ...
  4. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  5. Futures

    A financial contract obligating the buyer to purchase an asset ...
  6. Short Hedge

    An investment strategy that is focused on mitigating a risk that ...
Related Articles
  1. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  2. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  3. Forex Education

    Currency Carry Trades 101

    This strategy can provide returns even if the currency pair doesn't move a cent.
  4. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  5. Options & Futures

    A Detailed Look Into China's Options Market

    As the Chinese options market gradually takes shape, we provide an overview, including details of the initial phase and building blocks, primary beneficiaries, the impact on the overall financial ...
  6. Options & Futures

    How do you trade put options on E*TRADE?

    Learn all about put option trading at E*TRADE. Explore margin accounts and become familiar with the different types of option writing.
  7. Trading Systems & Software

    How do you trade put options on Ameritrade?

    Learn about option trading with TD Ameritrade. Explore the different types of options and their possible impacts on the investors that write them.
  8. Options & Futures

    What is the difference between a short position and a short sale?

    Learn how short selling and short positioning are different, specifically in regards to the nature of the commodity being bought and sold.
  9. Options & Futures

    Are there any risks involved in trading put options through a traditional broker?

    Explore put option trading and different put option strategies. Learn the difference between traditional, online and direct option brokers.
  10. Options & Futures

    Options -- Accessing Stakes In Apple At Less Cost

    Finding Apple stock costly to trade? Here are multiple ways to trade it through low-cost Apple options.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center