What Is ‘Effective Leverage’ and Why Might It Differ from the Platform’s Stated Leverage?
Effective leverage is the actual leverage being used based on the current market value of the position relative to the current equity in the account. It differs from the stated leverage (the maximum offered) because traders may use less than the maximum leverage, or the value of their position and equity may fluctuate.
It is a more accurate measure of the real-time risk exposure.
Glossar
Effective Leverage
Amplification ⎊ The concept of effective leverage, particularly within cryptocurrency derivatives, options trading, and broader financial derivatives, represents the realized degree of market exposure beyond the nominal notional value of a position.
Stated Leverage
Definition ⎊ Stated Leverage is the maximum leverage ratio advertised or offered by a derivatives exchange, representing the theoretical multiplier of a trader's capital that can be used to control a notional position size.
Leverage
Amplification ⎊ Leverage, within cryptocurrency, options, and derivatives, represents the utilization of borrowed capital to increase the potential return of an investment, fundamentally altering risk-reward profiles.