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directional

Leveraged Long

"Converts conviction into asymmetric payoff"

Using borrowed capital (margin) or derivatives to amplify exposure to an asset's price appreciation.

How It Works

  1. 1

    Identify high-conviction trade

  2. 2

    Use margin, call options, or futures to gain >1x exposure

  3. 3

    Asset price rise is multiplied by leverage ratio

  4. 4

    Interest/premium paid for the leverage

  5. 5

    Maintenance margin must be managed to avoid liquidation

Key Mechanics

leverage Ratio: 2:1, 10:1, etc.

Margin Call: forced liquidation if equity falls below threshold

Decay: cost of leverage (theta or interest) eats returns over time

Path Dependence: volatility can wipe out position even if direction is right

Regulatory Context

Margin limits (Reg T) restrict retail leverage. Derivatives markets have their own capital requirements.