There's a lot of depth in it, but here's my version for laymen. I was a derivatives trader in the financial markets and also did some work in crypto exchanges.

There's a lot of depth in it, but here's my version for laymen. I was a derivatives trader in the financial markets and also did some work in crypto exchanges. Imagine someone offers you a deal where instead of buying stocks, you agree with someone to pay you the difference between the price of a stock today and whenever you decide to exit the deal. PnL should look a lot like whatever the stock did over the period. Add to this that of course when the trade starts, it's worth about zero to either side. But there's a chance you're gonna lose money, so the exchange wants you to put up some money. Not the entire amount that the shares cost, because you probably won't lose that much. And we can adjust the margin according to how the market moves. So you can then get a much larger exposure than if you just bought the stock with the same amount of cash. Now add to this a minor wrinkle, that is you don't use the cash dollars to buy the bet, you actually use the stock. And if you win, you get more stock.