Identifier: C3T2L1 · Revision: 2026-10-26 · Classification: domestic

Decision and objectives

Separate notional, posted collateral and loss capacity. The decision record must connect the exposure, cash dates and implementable contract, rather than stop at a favorable price forecast.

By the end, you can separate notional, posted collateral and loss capacity; calculate leverage using a stated collateral denominator; demonstrate a loss beyond initial collateral.

Prerequisite: C3T1L5; completed Classes 1 and 2 and the Stock Market School foundation or Forex School foundation. All cases below are hypothetical; their prices, costs, rates, dates, contractual assumptions and collateral amounts are teaching inputs, not current offers.

Mechanics

Collateral is an asset pledged to support performance. It is neither a futures premium nor a contractual stop loss. A central counterparty manages member default risk, while the investor still owes losses through its intermediary. Noncash collateral may be valued below market value through a haircut, and a permitted asset is not necessarily instant cash for variation settlement.

Keep three balances: economic exposure, eligible collateral value and immediately transferable cash. A portfolio can have substantial securities wealth while missing a same-day cash obligation.

Price and return drivers

Nominal leverage = absolute notional / posted eligible collateral. It changes when price or collateral changes. For a linear long, downside toward a zero underlying quotation can approach the whole initial notional; for a short, an unbounded price rise has no finite theoretical loss ceiling. Some commodity quotations can require even wider stress assumptions; do not infer a universal floor from an index example.

Worked case

Three hypothetical long index contracts at 10,000 with TRY 10 multiplier give TRY 300,000 notional. Posted cash is TRY 45,000: leverage = 300,000/45,000 = 6.67 times. A 5% quotation decline to 9,500 loses 3 × 10 × 500 = TRY 15,000, consuming one third of collateral. After an assumed TRY 90 round-trip fee and TRY 450 funding cost, loss is TRY 15,540 before tax. Collateral remaining after these booked outflows is TRY 29,460; whether that is sufficient depends on the newly required margin.

Adverse case

A 20% gap to 8,000 loses TRY 60,000 gross, exceeding initial collateral by TRY 15,000 before costs. The investor still owes that difference. Selling the underlying portfolio after the gap may crystallize another loss and may settle too late. A hypothetical TRY 100,000 security posted with a 20% haircut contributes only TRY 80,000 eligible value; if the security falls to TRY 85,000 it contributes TRY 68,000, a further TRY 12,000 reduction without any derivative move.

Practical use

Use a member account with permitted collateral and confirm valuation, concentration limits, cash minimums and transfer deadlines. A public margin estimate cannot establish investor loss capacity. In the topic full-cost example, fees, funding and collateral reductions are separate lines; do not count deposited collateral as an expense or ignore its opportunity cost.

Reconcile the confirmation, position register and cash statement separately. Costs include the quoted bid/ask spread, brokerage and clearing charges, collateral or principal financing, currency conversion, custody where relevant, and exit or termination charges. A mark is not a fill. Any amount explicitly excluded below remains outside the reported result. Tax is excluded from these teaching cases: an actual comparison requires income year, investor residence and individual/corporate status, contract and acquisition dates, settlement form and effective law. The GIB guide, checked 2026-10-26, covers 2025 individual investment income, so its publication date alone does not settle a 2026 derivative liability.

Decision boundaries

Accept a position only if both loss capacity and cash access survive the stress. High leverage can be intentional for a hedge, but an offsetting asset gain often arrives later than the futures debit. Decline a futures implementation if the only funding source is an illiquid asset sale after the margin deadline.

Practice and references

Exercise: hypothetical notional TRY 480,000, collateral TRY 60,000, gross adverse move 15% of notional. Solution: leverage 8 times; loss TRY 72,000; gross collateral deficit TRY 12,000. Fees of TRY 120 increase the deficit to TRY 12,120. This is a cash obligation, not an optional further investment.

Takeaway: Demonstrate a loss beyond initial collateral using the actual cash schedule, with every excluded cost and remaining exposure stated.

Reference card: viop-future. Formula: Nominal leverage. Glossary: Collateral, Haircut, Nominal leverage. Next lesson: C3T2L2. Topic test.

Sources and verification date (2026-10-26):

Shared reference guide