4 contracts would give a notional value of 71 * 400 = $28400. It might cost about $500 in cash. With portfolio margin, my buying power (coming from the value of current equities) might be reduced by $3k to hold this position. So in essence, I am allocating $3500 for this trade.
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This gives me a notional exposure of $28.4k in the S&P 500 at the cost of $3500. That would give an overall leverage of (100-3.5+28.4)/100 = 1.25.
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This gives me a notional exposure of $28.4k in the S&P 500 at the cost of $3500. That is 8x leverage. That would give an overall leveraged portfolio of (100-3.5+28.4)/100 = 1.25.
### Futures as leverage
@@ 156,7 156,7 @@
1 /MES futures contract has a notional value of 5 * index price. Currently that is $30k. To buy this contract, I am required to set aside $2500 as a good faith deposit for the contract.
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This gives me a notional exposure of $30k in the S&P 500 with a deposit of $2500. The $2500 is only the bare minimum, and it is usually advised to keep 2-5x of cash to handle downswings (see [below](#futures-vs-equities-margin)). So I set aside $10k as a safe amount of cash for this contract. That means I get a notional exposure of $30k at the cost of $10k.
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This gives me a notional exposure of $30k in the S&P 500 with a deposit of $2500. The $2500 is only the bare minimum, and it is usually advised to keep 2-5x of cash to handle downswings (see [below](#futures-vs-equities-margin)). So I set aside $10k as a safe amount of cash for this contract. That means I get a notional exposure of $30k at the cost of $10k. That is 3x leverage.
That $10k needs to come from somewhere. I could sell $10k of equities. That would give an overall leverage of (100-10+30)/100 = 1.2.