Leverage
Using limited equity or margin to control a larger economic exposure.
Plain languagePractical exampleConnected reading
01
What is it?
Using limited equity or margin to control a larger economic exposure.
02
Why does it matter?
It magnifies gains and losses, so small market moves can cause large equity changes.
03
How should it be read?
Divide notional exposure by net equity and separately review liquidation and margin rules.
04
Common mistake
Assuming leverage exists only when cash is borrowed.
A simple example
Controlling a 50,000 position with 10,000 of equity is about 5x leverage.