How Does the ‘Notional Value’ of a Derivatives Contract Affect the Potential for Slippage?

The notional value is the total value of the underlying asset controlled by the contract. A higher notional value means a larger effective position is being traded.

When a trade with a high notional value is executed, it demands a greater amount of underlying liquidity. If this liquidity is not available, the trade will cause a larger price impact, leading to a higher potential for significant slippage, even if the premium or margin requirement is small.