In the context of investing, leverage is the use of borrowed money to fund an investment. If a position, individual, or organization is 'highly leveraged,' it means they are utilizing a large percentage of borrowed money. Leverage generally refers to a loan offered through a broker on an exchange that is used to increase the availability of funds for margin trading. It is often used to increase purchasing power for derivatives trading — essentially trading with borrowed funds. While there are potential benefits to using leverage, there is also an increased risk for loss of capital. For example, if a trade is opened with 10x leverage, this means that purchasing power is multiplied by a factor of 10, and that if the price of the asset fluctuates, the investor will lose or gain 10x the normal amount.
