Why Is the Notional Value Used Instead of the Initial Margin for Some Calculations?

Notional value, which is the total value of the contract (size current price), is used because it represents the total market exposure of the position. Risk management calculations, such as tiered margin requirements and liquidation risk, must be based on the full magnitude of the trade, not just the small fraction posted as initial margin.

The notional value provides the absolute scale of the potential loss or gain.