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  • CrayonMuncher

    Member
    July 6, 2021 at 2:19 pm

    You’re still buying and owning shares with or without leverage but the difference is whether or not you’re tapping into the leverage your broker is giving you.

    When buying with leverage, think of it as a loan your broker gives you. For example, if you have $10 in your account and they give you 5x, you now have $50 worth of buying power instead of just your own $10. That doesn’t mean you have to use all $50 worth of your buying power, but you do have it available to you.

    When you sell the security you bought using your leverage, you pay that back using a portion of your proceeds.

    If you are on a straight cash account with no leverage (or margin with 1:1), then none of this applies. You would only have the buying power of whatever dollar amount of settled cash is in your account, so in the previous example, it would be $10.