How leverage works (MODUL 5-7)

For example, assume you buy or sell a contract worth $100,000 and it moves against you by $2,000. No matter how much money you put up, your dollar loss will always be the same—$2,000—but the percentage loss varies with the amount of leverage. At 100:4 leverage, you will have lost half of your investment. At 100:2 leverage, you will have lost your entire investment. And at 100:1 leverage, you will have lost twice your investment and owe the dealer $1,000.

Notional value = $100,000 Loss = $2,000

Original Investment Leverage Remaining Funds Loss
$4,000 100:4 $2,000 50%
$2,000 100:2 $0 100%
$1,000 100:1 -$1,000 200%

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