Leverage calculator

Gross and net leverage

Leverage is position value divided by equity. Gross leverage adds longs and shorts together, since both are exposure the account carries and both need margin behind them. Net leverage subtracts the shorts from the longs before dividing, which comes closer to how the account behaves when the whole market moves at once. A $30,000 account holding $60,000 of stock and nothing short runs 2.0x on both measures. Add $20,000 of shorts and gross leverage climbs to 2.67x while net falls to 1.33x. The leverage ratio covers the other ways the figure gets quoted.

What the move does to equity

Equity takes the whole gain or loss. On the defaults, a 10% fall knocks $6,000 off a $60,000 long, and equity drops from $30,000 to $24,000. That is a 20% loss on a 10% move. The multiple is the net leverage, and it scales all the way down: a 50% fall in those stocks would take the whole 0,000, since at 2.0x net the equity falls twice as fast as the market. The calculator applies one move to every position, so a positive move lifts the longs and costs the shorts, and a negative move does the reverse. Real holdings don't move in lockstep, and a short in a stock that rallies while the market falls hurts on both sides at once. Try a move sized to a bad month for the stocks you actually hold.

Where a broker's view differs

A broker may work from a different equity figure, one net of accrued interest or with options marked at market value, and some firms report buying power and leave the ratio to you. Leverage also drifts on its own. After the 10% fall, $54,000 of stock against $24,000 of equity is 2.25x, higher than where the account started, which is how a losing account on margin grows riskier with every day it keeps losing. The maintenance requirement works against the same shrinking equity; see maintenance margin and the lesson on sizing a margin position so it survives a bad month. A funded trading account carries leverage of its own, argued in a prop firm account is leverage too, just rented.