3 ms·

That's the thing about leverage. The money never existed in the first place.

• mrlala 9y ago
  No that's not true. Leverage and "money that never existed" are not one in the same. For example, if you buy a futures contract with a value of $1000 but it only requires a 10% margin ($100) to buy the contract.. you are levered 10x if you only put $100 into the account. Let's say the futures contract drops 50% down to $500. You just lost $500 even though you put in $100. Someone gets that money on the other side. So there's an example of leverage that has nothing to do with money never existing. Money that never existed is how you could talk about the vast majority of investments, but has nothing to really do with leverage. Let's say my company goes public and it's valued at $1,000,000. The share price is $100. Well people keep buying and selling higher and higher, now the share price is $200. Then $300. Everyone now holding the shares at $300 has the company valued at $3,000,000 and claims they collectively "have" $3,000,000 of value.. but.. nothing changed. My company has done nothing different. This is money that never existed in the first place.