Define the Term “Notional Value” of a Derivatives Contract

The notional value is the total face value of the underlying asset controlled by the derivatives contract. For a futures or options contract, it is calculated by multiplying the contract size (e.g.

1 Bitcoin) by the current price of the underlying asset. It represents the total value of the exposure being hedged or speculated upon, not the actual cash outlay required (which is only the margin or premium).