Leverage

Leverage.

Broadly defined: using Other Peoples' Money to increase your returns (at the cost of higher risk).

So borrowing money in some way, to create a higher return against a price movement of an underlying asset (stock, bond, house etc.).

So your gross exposure to a stock, or other asset, instead of being 100 (the money you have) becomes 200 (with the 100 you borrowed).

That means when you sell, you have doubled your return (if the asset goes up in value) less the cost of borrowing. Of course this is true on the downside as well.

You can leverage via, for example:

- home mortgage - stock margin account - hedge fund borrowing against its own investments - derivative security like an option or swap