A leveraged position is any investment or exposure to an asset on more than a 1:1 basis e.g. 1:-1. 1:3 This increased exposure can be obtained using a range of techniques.
Say the price of ETH is $172.35. You deposit $172.35 with a leverage factor of 3x. This increase in buying power allows you to purchase 3 ETH for $517.05 instead of 1.
By using leverage, you are able to magnify the positive or negative returns. These potential returns or losses will be greater than the amount from an unleveraged position.
In the example above lets say the price of ETH increase by 5% to $180.9675. In the unleveraged position, a deposit of $172.35 gives you a return of 5%. In the leveraged position 3 ETH is now worth, $542.9025. Compared to the initial purchase of $517.05, this gives you a return of 15%.
The risk with using leverage is that it also magnifies the amount of losses should the price of the underlying decline. Lets say ETH decreased by 5% to $163.7325. Your order value would have in return dropped by 15% to $491.1975.
It is important to note that leveraged positions are complex and bear high risk. These positions bear an even higher risk in volatile markets which can cause the position-holder to lose their entire position or significantly more than they were expecting. Tokens offering leveraged exposure are only intended for those who understand the risks involved and intend to hold on a short-term basis. Please make sure you read our Educational Section before you consider purchasing.