Basic Points

• The notional value is the equivalent cash value that is associated with a position. 
• Financial derivatives like futures, options, and foreign exchange pairs have multipliers that determine their actual (notional) value. The notional value of futures and other financial derivatives usually represent much greater values than their listed prices. 
•  It is critical for trading safely to understand the notional value of financial derivatives–so as to avoid catastrophic mistakes where too much size is accidentally used. One should never trade any derivatives contract unless the notional value is fully understood. 
• For most options, it is calculated by multiplying the premium amount times contracts held times 100. But for some options on index products the multiplier is different, such as SPX and VX with x1000 multipliers. 

Intermediate: A Closer Look at Notional Value

The notional value interprets the total value, after all the leverage is added up. Note that on options for futures there is only one contract assigned for each option. Futures also have notional values sensitive to arbitrary and disparate contract multipliers throughout the CME complex. 

Always know your multipliers and notional value when trading futures and index options. This is never predictable for new products and should always be checked. For example, the multiplier for heating oil contracts (HO) is x42,000!

For futures products, the CME website will always have this information posted under the Specs tab and then the section at the top for "Contract Unit". One should never trade an option without understanding the notional value involved (as a result of differing multipliers).