Notional value
From MarketsWiki
The value of a futures contract is referred to as notional value, probably best understood as its underlying value. Notional value is the value of a derivatives product's underlying assets at the spot (cash) price. This value represents the equivalent dollar amount represented when trading a single futures contract. In the stock market, there is no “notional value,” because what you buy – and own – is based on the actual value of that stock.
To determine notional value of a futures contract, one needs to know the futures contract size (a fixed, standard size) and the price per unit. By multiplying the two, the notional value is determined.
For example, soybean futures with a price of $8.00 per bushel (price per unit) would have a notional value of $40,000. You simply multiply the market price – $8.00 – by the 5,000 bushels, which is the standard contract size for one soybean futures contract.
Knowing the notional value of a futures contract is important for traders because margins/performance bonds are generally calculated as a percentage of that value. Thus, if, for example, futures margins are five percent of a contract that has a notional value of $40,000, it would equal a minimum margin of $2,000 ($40,000 x .05 = $2,000). A futures contract with a notional value of $150,000 would equal a minimum margin of $7,500 ($150,000 x .05 = $7,500).
