Calculate profit/loss and return on margin for a futures contract trade.
P&L = (Exit price − Entry price) × Contract size × Number of lots. Return on margin = P&L ÷ Margin required × 100.
Educational tool only — not investment advice. Markets involve risk; past performance and illustrative math don't guarantee future results.
A futures contract's margin is often misunderstood as its price or its cost — it's neither. Margin is a good-faith performance deposit posted with a broker to open and hold a position, representing only a fraction of the contract's full notional value (current price multiplied by the contract's size multiplier). A crude oil future trading at $70/barrel with a 1,000-barrel contract size has a notional value of $70,000, but the initial margin required to control that same contract might be only $7,000 — roughly 10% of notional, which is a fairly typical margin requirement, though it varies by product and can range from about 3% to 12% of notional value.
That gap between margin posted and notional value controlled is exactly what creates leverage — leverage equals notional value divided by margin required, so the $70,000/$7,000 example above is 10:1 leverage. The mechanism that makes this workable day to day is mark-to-market: futures accounts are settled daily against the current market price, with gains or losses credited or debited to the account each day rather than accumulating unrealized until the contract's expiry. This daily settlement is also what triggers margin calls — if the account balance falls below the maintenance margin level after a day's mark-to-market adjustment, the trader must add funds immediately or the position may be force-liquidated, which is why futures losses can materialize and demand action far faster than the underlying price move alone might suggest.
No — margin is a good-faith performance deposit, not a purchase price or a loan. It represents only a fraction (commonly roughly 3-12%) of the contract's full notional value (current price × contract multiplier), posted to open and maintain the position.
Leverage = Notional Value ÷ Margin Required. A crude oil contract with $70,000 notional value and a $7,000 initial margin requirement carries 10:1 leverage — a smaller margin requirement relative to notional value creates proportionally higher leverage.
Futures accounts are settled daily against the current market price — gains or losses are credited or debited to the account balance every trading day rather than only being realized at contract expiry or when the position is closed. This daily cash settlement is a defining structural feature of futures versus many other derivatives.
If daily mark-to-market losses push the account balance below the maintenance margin level (the minimum equity required to keep the position open), a margin call is triggered requiring additional funds be deposited immediately. Failure to meet a margin call can result in the broker force-liquidating the position.