Definition
Controlling a large position with a relatively small amount of money, which makes both gains and losses bigger.
The story
One NQ (E-mini Nasdaq-100 futures) contract moves $20 for every point the Nasdaq-100 moves. At an index level of 25,000, for example, one contract controls about $500,000 worth of exposure, yet the deposit a broker requires is a small fraction of that. A 1% move in the index is about $5,000 on that one contract, in either direction.
Why markets watch it
Leverage is why futures can move an account so quickly, and why regulators warn that losses can exceed what you put in.
Connects to
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms