What Is the Formula for Calculating the Leverage Ratio on a Derivatives Trade? ▴ Learn

What Is the Formula for Calculating the Leverage Ratio on a Derivatives Trade?

The leverage ratio is calculated by dividing the total notional value of the position by the margin (or collateral) used to open the position. For example, if a trader controls a $10,000 position using $1,000 of margin, the leverage ratio is 10:1 or 10x.

This ratio indicates the magnification of potential returns and risks relative to the capital put down.

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