leverage.
It has nothing to do with your example. buying a house borrowing 80% is not leverage. Leverage are used in investing in futures, options, currency tradings and derivatives. It is not a loan.
Let me give your an example.
If you have 100 dollars. You can buy 10 shares of $10 stocks. that leverage is 1:1
with levearge 10:1 you can use 100 dollar to trade 100 shares. meaning 100 dollar leveraged 10 times to $1000.
With 30:1 leverage you can invest $3000 with only 100 dollars. What that mean? if it is down 3.333% you 100 dollar principles will get wipped out. Can you imagin if it is down 10%? European banks levearged 60:1. that is why they are in deep crap.
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