How the calculation works
Illustrative initial margin = position notional ÷ leverage. Hypothetical P/L = notional × underlying price change percentage (for a long, before costs). P/L as a percentage of posted margin = hypothetical P/L ÷ margin × 100.
Worked example
A $10,000 long position with 10:1 leverage has an illustrative $1,000 opening margin. If its underlying price moves −5%, the simplified position P/L is −$500, equal to −50% of the initial margin, before transaction costs and margin close-out.
How to interpret the output
- Leverage changes required opening capital, not the economic exposure of the position.
- A relatively small underlying price move can represent a large percentage of initial margin.
- Real margin close-out may occur before the calculated loss scenario finishes.
Important limitations and assumptions
- Actual allowed leverage, margin tiers, stop-out thresholds and negative-balance protections depend on instrument, client type, broker and jurisdiction.
- The P/L scenario assumes a long exposure and ignores fees, slippage and contract adjustments.
- Do not use this as a broker’s current margin quote.
Important: This is a transparent arithmetic illustration, not a trading forecast. Live spreads, execution, broker rules and investor protections can affect actual outcomes.