Notional Value

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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).

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BREAKING DOWN '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.

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RELATED FAQS
  1. How can I calculate the delta adjusted notional value?

    Delta adjusted notional value is used to show the value of an option. This is different from most other derivatives, which ... Read Full Answer >>
  2. How big is the derivatives market?

    The derivatives market is, in a word, gigantic, often estimated at more that $1.2 quadrillion. Some market analysts estimate ... Read Full Answer >>
  3. What is the difference between underwriting and investment income for an insurance ...

    Underwriting and investing are two different methods an insurance company uses to generate income. The underwriting income ... Read Full Answer >>
  4. How is the spot price related to a derivative's notional value?

    A derivative's notional value is directly related to the spot price of the security. To calculate the total value of a derivative ... Read Full Answer >>
  5. What is the difference between notional value and market value?

    The notional value and market value describe the amount of a security. The notional value is the total value of options, ... Read Full Answer >>
  6. What are some common markets where notional value is used?

    Notional value is commonly used in futures and swap markets. The notional value is the total net amount of derivative contracts, ... Read Full Answer >>
  7. How can I calculate the notional value of a futures contract?

    Calculate the notional value of a futures contract by multiplying the size of the contract by the price per unit of the commodity ... Read Full Answer >>

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