When You Trade Leveraged Products?

Leveraged products are financial instruments that enable traders to gain greater exposure to the market without increasing their capital investment. They do so by using leverage. Any financial instrument that allows you to take a position that is worth more on the market than your initial outlay is a leveraged product.

What happens when you trade with leverage?

Leverage is a trading mechanism investors can use to increase their exposure to the market by allowing them to pay less than the full amount of the investment. Consequently using leverage in a stock transaction, allows a trader to take on a greater position in a stock without having to pay the full purchase price.

What are the risks of trading leverage products?

Since they use financial derivatives, leveraged ETFs are inherently riskier than their unleveraged counterparts. The additional risks come in the form of counterparty risk, liquidity risk, and increased correlation risk.