Calculating Leverage on Futures Contracts

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BuySellSideTrader2020

How do you calculate your total leverage on a futures contract?
For example ES 12-18 with a $500 intraday margin per contract
if ES closed at 2683.25 today that would be 2683.25 * 50 = $134,162.50 (value of contract) then $134,162.50 / 2685.25 = 50:1 Leverage? Or am I missing something?
A mathematical formula would be helpful.
 
There is really no point in knowing the actual leverage unless you are the geeky type of guy. Your initial and maintenance margin is the meaningful data, not the actual leverage.

But here is another way to get the leverage: 1% of market move causes how many % of your account's size? That is your leverage....Let's say your account is 10K and you are long 1 contract. 1% of market move would give you 27 x 50 = 1350 profit. So your leverage is 1:13.5

Had you used 3 contracts, your leverage would have been 1:40
 
BuySellSideTrader2020 said:
How do you calculate your total leverage on a futures contract?
For example ES 12-18 with a $500 intraday margin per contract
if ES closed at 2683.25 today that would be 2683.25 * 50 = $134,162.50 (value of contract) then $134,162.50 / 2685.25 = 50:1 Leverage? Or am I missing something?
A mathematical formula would be helpful.
More...

Your leverage would be $134,000 / $500... basically 268:1. (Best be trading with a tight stop)
 
Pekelo said:
There is really no point in knowing the actual leverage unless you are the geeky type of guy
More...
IMO, this is very material because it puts risk in perspective. $500/ES typically targets smaller DT accounts where the owner of the account is less able to handle losses. We offer up to 25% of Span margin for DT and in some cases I think it can be too high when all the leverage is used on one symbol. I do not think that 13X the CME requirement is a good idea and in many cases does not end well.
 
I don’t know any traders and this question came up to me...”am I over leveraged”

I trade (2) NQ futures contract per $50k in my account. I typically risk 1.8% of capital on deposit per trade... and take maybe 3 positions per month or so in the nq.

If for instance I double my money, I would then trade 4 nq. (100k would be 4 contracts in the nasdaq futures)

In the spectrum of traders you have seen...am I overleveraged?

(I don’t hold over the weekend, but overnight I do)
 
Palindrome said:
I don’t know any traders and this question came up to me...”am I over leveraged”

I trade (2) NQ futures contract per $50k in my account. I typically risk 1.8% of capital on deposit per trade... and take maybe 3 positions per month or so in the nq.

If for instance I double my money, I would then trade 4 nq. (100k would be 4 contracts in the nasdaq futures)

In the spectrum of traders you have seen...am I overleveraged?

(I don’t hold over the weekend, but overnight I do)
More...

Leverage is a relative thing. The greater factor you use, the better you need to be about entries and stop discipline.

With your "1 NQ/$50k capital", that's ~3:1 leverage. That's actually quite a lot. (I've traded for years and have NEVER had my "total capital" levered even 2:1.... Maybe that's why I'm still around??)

Leverage is GREAT when it works in your favor. It's a nightmare when it's against. Nobody NEEDS to trade on leverage, ever!
 
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Palindrome said:
Its actually (2) NQ's per 50k of capital... 2 contracts. I did not feel it was that high relative to other traders.
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Hey... you can make all kinds of "aggressive, sensible" plays... if you're disciplined about stop losses. If you don't have discipline, likely no amount of leverage is safe.
 
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