Leverage and Margin in Futures: What They Really Mean
Margin is the deposit required to hold a futures position; it is not the cost of the trade and not its risk. Leverage is the ratio between the notional value you control and the money in the account. The two are linked, but only leverage tells you how much a market move affects your account.
Beginner · 9 min read · Updated
What you will learn
Calculate the notional value of a futures position and the real leverage of an account.
Read first: Risk per Trade: How Much Should You Risk on One Trade?
Notional value: what you really control
The notional value of a futures contract is its price multiplied by its multiplier, the dollar value of one point.
| Contract | Value of one point | Index level | Notional value |
|---|---|---|---|
| E-mini S&P 500 (ES) | $50 | 6,000 | $300,000 |
| Micro E-mini S&P 500 (MES) | $5 | 6,000 | $30,000 |
| E-mini Nasdaq-100 (NQ) | $20 | 21,000 | $420,000 |
| Micro E-mini Nasdaq-100 (MNQ) | $2 | 21,000 | $42,000 |
The values of one point come from the CME Group contract specifications; the index levels are round numbers for the example.
Initial margin, maintenance margin and day-trading margin
- Initial margin: the deposit required to open a position, set by the exchange’s clearing house; brokers may ask for more.
- Maintenance margin: the level below which the account must be topped up; otherwise the broker can close the position.
- Day-trading margin: a lower amount some brokers accept for positions closed before the end of the session. It allows larger positions on a small account, which is exactly why it raises risk.
Margin amounts change with market volatility, so check the current figures with your broker rather than memorising them.
Real leverage
Real leverage = total notional value of open positions ÷ account equity.
Hypothetical example · One MNQ on a $10,000 account
One MNQ at 21,000 has a notional value of $42,000: a leverage of 4.2. A 2% move in the Nasdaq-100 is 420 points, worth 420 × $2 = $840, or 8.4% of the account. With one NQ instead, the notional is $420,000, a leverage of 42, and the same 2% move is $8,400 — 84% of the account.
The margin did not appear in this calculation. A low margin lets you open the NQ position; it does not make it less risky.
Keeping leverage under control
- Size positions from the stop with the method of the lesson on risk per trade; leverage then follows from the stop, not from the available margin.
- Check the total notional of all open positions before adding one, especially on correlated markets.
- Remember that gaps can skip stops: overnight and weekend positions carry a risk that intraday stops do not cover.
A margin call, step by step
Hypothetical example · Two MNQ on a $10,000 account
Suppose a broker requires $2,000 of maintenance margin per MNQ contract — a figure chosen for the example, not a current requirement. Two contracts need $4,000. Together they are worth $4 per point. A 5% fall from 21,000 is 1,050 points, a loss of $4,200: equity drops to $5,800, still above $4,000. An 8% fall is 1,680 points, a loss of $6,720: equity drops to $3,280, below the requirement, and the broker can ask for funds or close the positions.
Notice that the account had to lose 60% of its value — a fall of about 7.1% in the index — before the margin rule acted. A stop based on the trade idea protects the account long before margin does.
Common mistakes
- Treating margin as the maximum loss.
- Opening the largest position the margin allows.
- Ignoring that margin requirements can be raised during volatile periods.
- Holding leveraged positions through releases or weekends without planning for gaps.
Practice exercise
Write down every position you held this week. Calculate the notional value of each and the total leverage of the account at its highest point. Then calculate what a 1% and a 3% move against all positions together would have cost.
Check your understanding
1. What is the notional value of one MES at an index level of 5,000?
- $5,000
- $25,000
- $250,000
Show the answer
Answer: $25,000. 5,000 × $5 = $25,000.
2. What does a low day-trading margin change?
- It reduces the risk of a position
- It lets you open larger positions for the same account
- It lowers the value of a point
Show the answer
Answer: It lets you open larger positions for the same account. Margin is a deposit; it does not change how much a point is worth.
3. One NQ ($20 per point) on a $20,000 account at 20,000: what leverage?
- 2
- 10
- 20
Show the answer
Answer: 20. Notional 20,000 × $20 = $400,000; $400,000 ÷ $20,000 = 20.
Practise with the free tools
Frequently asked questions
Is margin a fee?
No. It is a deposit held while the position is open, returned when it is closed, minus any loss.
What leverage is safe?
There is no universal number. Size from your stop and risk per trade; then check that total leverage stays at a level where a normal market move does not threaten the account.
Why do micro contracts help smaller accounts?
Their point value is one tenth of the standard contract, so position size can be adjusted in much smaller steps.
Related lessons
References and further reading
- E-mini S&P 500 futures contract specifications — CME Group
- E-mini Nasdaq-100 futures contract specifications — CME Group
- Basics of Futures Trading — U.S. Commodity Futures Trading Commission
- CFTC Glossary (stop order, margin, leverage) — U.S. Commodity Futures Trading Commission
Written with the help of AI tools, then checked against the sources listed and our methodology. Report an error and we will correct it. Methodology · Editorial policy · Report an error
Educational content only, not investment advice. Futures and leveraged products can lose more than the initial deposit.
Educational content. These indicators are not investment advice and guarantee no result. Futures trading involves a risk of loss that can exceed the initial investment. Terms of use · Disclaimers