can you buy stocks with leverage? Complete Guide

This guide answers “can you buy stocks with leverage?” and explains what leveraged stock exposure means, common products (margin, CFDs, options, futures, leveraged ETPs), mechanics, costs, risks, p...

2026-01-06 05:18:00

By Lily Wong

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Can You Buy Stocks With Leverage?

Asking “can you buy stocks with leverage?” is common among traders who want bigger exposure than their cash alone allows. In investing, buying stocks with leverage means using borrowed funds or leveraged instruments — such as margin accounts, CFDs, options, futures, or leveraged ETPs — to amplify returns (and losses). This guide explains what leverage is, how it works, typical ways to get leveraged exposure to equities, costs, risks, worked examples, and safe starting steps. Read on to learn practical mechanics, real numeric examples, and how to explore leveraged stock trading responsibly using platforms like Bitget.

Definition and basic concept

Leverage in investing means using borrowed money or financial instruments that amplify the exposure to an underlying asset relative to your own capital. When you ask “can you buy stocks with leverage?”, the short answer is yes — through several methods that let you control a larger notional position than your cash would permit.

Important clarifications:

Leverage vs. margin: “Margin” commonly refers to a broker loan or the account type that permits borrowing. “Leverage” is the broader concept describing the degree to which exposure is amplified (e.g., 2x, 5x, 10x).
Amplification of returns and losses: Leverage multiplies both gains and losses. Small percentage moves in the underlying can translate into large percentage moves in your equity in the trade.
Instruments: Leveraged exposure can come from borrowing (broker margin), derivatives (options, futures), or structured products (leveraged ETFs/ETPs and CFDs where available).

When you search “can you buy stocks with leverage?”, understand that each route has distinct mechanics, costs, eligibility and regulatory constraints.

Common ways to buy or get exposure to stocks with leverage

Below are the primary methods retail traders use to buy or obtain leveraged exposure to stocks.

Margin accounts (borrowing from a broker)

Buying stocks on margin means borrowing cash from your broker to purchase shares. You put up a portion of the position as equity (initial margin) and the broker lends the rest.

Key mechanics:

Initial margin: The percentage of the purchase price you must deposit when opening the trade (for U.S. cash equity purchases, Regulation T commonly requires 50% initial margin on many accounts, though broker rules vary).
Maintenance margin: The minimum equity percentage you must keep in the account to avoid a margin call. If your equity falls below this level, the broker can demand additional funds or liquidate positions.
Collateral: Purchased securities and cash in the account typically collateralize the broker loan.
Interest: Borrowed funds accrue margin interest charged by the broker.

When people ask “can you buy stocks with leverage?” they often mean using a margin account. Margin allows leveraged long positions in actual stocks, but you can also use margin for short selling.

Contracts for Difference (CFDs) and spread products

CFDs are derivative contracts that allow traders to speculate on price moves without owning the underlying security. They provide leveraged exposure by requiring only a small initial deposit (margin) relative to the notional value.

Notes about CFDs:

Availability: CFDs are widely offered in some jurisdictions and restricted or banned in others. Regulatory caps on retail leverage differ by country.
No ownership: CFD holders do not own the underlying shares; they have a contract with the CFD provider.
Financing charges: Positions held overnight usually incur financing costs.
Counterparty risk: CFD exposure depends on the provider’s creditworthiness.

If you’re asking “can you buy stocks with leverage?” and you live in a CFD-friendly jurisdiction, CFDs are a common levered option — but check local rules.

Options (buying calls, spreads)

Options are contracts that give the right (but not the obligation) to buy or sell a stock at a set price before or at expiry. Buying a long call option is a way to get leveraged exposure to a stock’s upside while risking only the option premium.

Important points:

Long calls: Paying a premium for a call can provide high percentage upside if the stock moves above the strike. Cost is limited to the premium paid (defined risk) but leverage can be significant.
Spreads: Option spreads can tailor leverage and risk (e.g., debit spreads reduce cost and upside but limit loss).
Margin vs. premium: Buying options does not require borrowing (except for writing options or certain complex strategies). Sellers/writers of options may face margin requirements or potentially unlimited risk depending on the strategy.
Time decay (theta): Options lose value over time if other factors are constant, which is a cost of leveraged exposure via options.

Options answer “can you buy stocks with leverage?” by offering a tool that amplifies returns with defined upfront risk for buyers.

Futures and single-stock futures

Futures are standardized contracts obligating purchase or sale of an asset at a future date. Index futures and single-stock futures allow highly leveraged exposure because margin posted is only a fraction of the contract’s notional value.

Essentials:

High leverage: Initial margin is a fraction of notional exposure, so small price moves produce large P&L swings.
Mark-to-market: Futures are typically marked to market daily, and margin requirements can change rapidly.
Settlement: Contracts may be cash-settled (index futures) or physically settled (depending on the product).

For the query “can you buy stocks with leverage?”, futures provide a direct path to amplified exposure — but they require understanding daily margin mechanics and settlement.

Leveraged exchange-traded products (ETFs/ETPs/ETNs)

Leveraged ETFs/ETPs aim to deliver a multiple (e.g., 2x, 3x) of a benchmark’s daily return. They use derivatives and financing to reach an objective and rebalance daily.

What to know:

Daily target: Most retail leveraged ETPs target a multiple of daily returns, which can produce path-dependent results over longer holding periods.
Instruments used: Providers may use swaps, futures, options and/or borrowed funds.
Compounding/drift: Over multiple days, compounding and volatility can cause returns to diverge from the long-term expected multiple.

As an answer to “can you buy stocks with leverage?”, leveraged ETFs let investors get magnified daily exposure to indices or baskets, but they are generally not recommended for long-term buy-and-hold due to decay effects.

Margin loans / securities-backed lines of credit

Securities-backed lending (SBL) provides a loan secured by a portfolio of stocks or funds. Traders may use SBL proceeds to buy additional stocks or for other purposes.

Key details:

Loan-to-value (LTV): Lenders set limits on how much they will lend relative to the collateral value.
Interest: Borrowing costs apply; rates may be lower than unsecured loans but still material.
Risk: A drop in collateral value can trigger margin maintenance requirements or forced repayment/asset sale.

As part of the answer to “can you buy stocks with leverage?”, SBL is a portfolio-level approach to increasing exposure but requires prudent risk monitoring.

How leverage works (mechanics)

Understanding the math behind leverage helps answer how and when you should use it.

Leverage ratio: If you control $10,000 of stock with $5,000 equity and $5,000 borrowed, your leverage is 2:1. A 10% move in the stock produces a 20% return on your equity (ignoring interest and fees).
Profit/loss on full notional: Gains and losses are calculated on the total exposure. If a position appreciates, your profit equals notional change minus financing costs; if it falls, losses likewise apply to full exposure.
Margin interest & financing: Borrowed funds incur interest (margin rates). Leveraged ETPs and CFDs embed financing costs in their daily roll/fees.
Maintenance margin, margin calls, forced liquidation: If losses reduce equity below maintenance levels, brokers may issue margin calls demanding top-up funds. Failure to meet calls can lead to forced partial or full liquidation.
Path dependence: For instruments that rebalance daily (leveraged ETFs) or that have time decay (options), returns over multiple periods can diverge from simple multiples of cumulative underlying returns.

Regulation, eligibility and broker rules

Regulation and broker policies determine who can use leverage and how much.

Regulatory limits: In the U.S., Regulation T often sets initial margin (historically 50% for many equity purchases). For CFDs and contract-based products, jurisdictions often impose caps on retail leverage.
Pattern day trader rule (U.S.): FINRA rules require day traders with pattern activity to maintain a minimum account equity (e.g., $25,000) to access higher intraday leverage.
Broker approvals: Many brokers require margin or options approval levels and evaluate experience, financials and suitability before enabling leveraged products.
Account types: Cash accounts (no borrowing) vs. margin accounts (permit borrowing) vs. portfolio margin (offers lower initial margins for certain strategies but requires higher equity and approval).

When you ask “can you buy stocks with leverage?”, remember that your broker and local regulator will shape available choices and limits.

Costs associated with leveraged stock purchases

Costs reduce the effective return of leveraged trades and vary by product.

Direct costs:

Margin interest: Charged on borrowed funds in a margin account.
Financing/borrow rates: Embedded in leveraged ETFs, CFDs, and futures rolls.
Commissions and spreads: Execution costs for opening/closing positions.

Indirect costs:

Option premium/time decay (theta): Erodes option buyer value over time.
Tracking error and daily rebalancing drag for leveraged ETPs: Over several days, volatility and compounding can reduce returns relative to expected multiples.
Borrow fees for stock loans when shorting: Higher for hard-to-borrow names.

Any answer to “can you buy stocks with leverage?” should weigh these costs against potential gains.

Risks and disadvantages

Using leverage increases risks materially:

Amplified losses: Leverage raises the chance of large losses; you can lose a significant portion or all of your equity.
Possibility to owe more than deposited: Certain products (like some margin shorts, futures, or CFDs) can produce losses exceeding your account balance.
Margin calls and forced liquidations: Rapid adverse moves can force brokers to liquidate positions without consent.
Gap and overnight risk: Overnight news or earnings can gap prices, bypassing stop orders and causing larger losses.
Time decay and path dependence: Options and leveraged ETPs have time-based and path-dependent mechanics that erode returns.

Given these risks, it’s essential to have risk controls before using leverage.

Potential benefits and typical use cases

Why do traders use leverage? Valid reasons include:

Capital efficiency: Control a larger position for less capital.
Hedging: Use leverage to offset directional exposure cheaply (e.g., buying puts as protection).
Short-term tactical trades: Capture anticipated short moves without tying up full capital.
Efficiency for experienced traders: Professionals use structured leverage for specific strategies.

But the benefits are conditional on skill, discipline and proper risk management.

Practical examples and worked calculations

Below are simple numeric comparisons to illustrate “can you buy stocks with leverage?” in practice.

Example 1 — Margin (2:1 leverage):

Cash: $5,000 of your own capital.
Borrowed: $5,000 on margin.
Total exposure: $10,000 worth of Stock A at $100 per share → 100 shares.

If Stock A rises 10% to $110:

Position value = $11,000.
Gross profit = $1,000.
Ignoring interest/fees, return on your $5,000 equity = 20% (1,000/5,000).

If Stock A falls 10% to $90:

Position value = $9,000.
Loss = $1,000 → 20% loss on equity.

This demonstrates how a 10% move in the stock becomes a 20% move on equity with 2:1 leverage.

Example 2 — Higher leverage (5:1):

Equity: $2,000.
Borrowed: $8,000.
Exposure: $10,000.

A 10% fall causes a $1,000 loss — which is 50% of equity — illustrating rapid depletion of account equity at higher leverage.

Example 3 — Long call option as leveraged exposure:

Stock price: $100.
Buy 1 call option contract (100 shares) with strike $105 expiring in one month, premium $2.00 per share → cost $200.

If the stock moves to $110 at expiry:

Intrinsic value = $5 per share → $500.
Profit = $500 - $200 premium = $300 → 150% return on $200 premium.

If the stock stays below $105 at expiry, option expires worthless and you lose the $200 premium (100% loss of premium). This shows defined-risk leverage via long options.

Example 4 — Leveraged ETF daily amplification and compounding effects:

Underlying index day returns: Day 1 +2%, Day 2 -1.5%.
2x leveraged ETF target: Day 1 return = +4% → value 1.04. Day 2 return = -3% → value 1.04 * 0.97 = 1.0088 → +0.88% over two days.

Compare with 2x of cumulative index return: Net index return = (1.02 * 0.985) -1 = -0.01 → -1% cumulative; 2x would be -2% if applied to cumulative return. The daily-rebalanced 2x ETF returned +0.88% — highlighting path-dependence.

These examples illustrate mechanics and why careful sizing matters when you ask “can you buy stocks with leverage?”.

How to get started safely (best practices)

If you decide to explore leveraged stock exposure, follow disciplined steps:

Assess risk tolerance: Know whether you can tolerate large drawdowns and potential margin calls.
Education: Learn product mechanics (margin rules, option greeks, futures margin, leveraged ETP rebalancing).
Broker account setup: Apply for margin and/or options approval with a reputable broker. For crypto-linked or web3 wallets, prefer Bitget Wallet where applicable.
Read agreements and disclosures: Understand margin interest rates, liquidations, and financing terms.
Position sizing: Limit leverage — consider maximum notional exposure as a small percentage of net liquidating value.
Use stops and monitoring: Set stop-loss rules and monitor maintenance margin.
Start small or simulate: Use paper trading or small amounts before scaling.
Keep capital for margin: Maintain a buffer to avoid forced sales during volatility.

These best practices reduce the chance that answering “can you buy stocks with leverage?” will lead to outsized losses.

Alternatives to direct leveraged stock purchases

If you want greater exposure without direct leverage, consider:

Dollar-cost averaging: Increase exposure over time to manage entry risk.
ETFs and sector funds: Gain diversified exposure with no borrowed funds.
Hedged strategies: Covered calls or collars reduce risk while tweaking returns.
Defined-risk derivatives: Buying options (not writing them) gives leverage with known maximum loss.

These approaches can be useful alternatives when the question is “can you buy stocks with leverage?” but you want lower risk.

Tax and accounting considerations

Tax treatment varies by product and jurisdiction:

Interest deductibility: In some places, margin interest may be tax-deductible against investment income; in others it may not.
Short-term vs. long-term gains: Leveraged trading often creates short-term taxable events taxed at ordinary income rates in many jurisdictions.
Derivatives: Options and futures may have special tax rules; holding periods, wash-sale rules and constructive sales can complicate reporting.

Always consult a tax professional to understand local rules before using leverage.

Frequently asked questions (FAQ)

Q: Can you lose more than you deposit? A: Yes — depending on the product. Margin short positions, futures, and CFDs can produce losses exceeding your deposited equity. Buying long options typically limits loss to the premium paid.

Q: Are leveraged ETFs suitable for buy-and-hold? A: Generally not. Leveraged ETFs typically target daily multiples and can suffer from compounding effects over time, making them poor long-term holdings for many investors.

Q: How do margin calls work? A: If account equity falls below maintenance margin, the broker issues a margin call to add funds or reduce positions. If unmet, the broker can liquidate positions, possibly without client consent.

Q: Do all brokers offer the same leverage? A: No. Leverage limits and margin rates differ across brokers and jurisdictions. Brokers also set approval levels for margin and options.

Q: Can retail traders use portfolio margin? A: Some experienced or institutional clients can access portfolio margin, which often offers lower capital requirements but requires higher account minimums and approvals.

Common pitfalls and regulatory warnings

Regulators and consumer protection agencies frequently warn retail investors about leverage:

Risk disclosures: Leveraged products carry explicit warnings about the potential for rapid and large losses.
Retail losses: Historical data shows many retail traders lose money in high-leverage products.
Suitability: Brokers must assess suitability and may restrict access if products are inappropriate for retail clients.

Understand product-specific mechanics and read prospectuses and margin agreements before using leverage.

Practical context from recent market reporting

As of 2026-01-14, according to Barchart, Fastenal reported Q4 CY2025 revenue of $2.03 billion and GAAP EPS of $0.26, both in line with estimates. Fastenal’s market capitalization at that time was reported at $50.22 billion and the company showed year-on-year revenue growth of 11.1% for the quarter. These corporate results and market commentary illustrate how equity prices can react to earnings beats, misses and guidance — events that can rapidly change leveraged positions’ P&L.

When considering “can you buy stocks with leverage?”, remember company news (earnings, guidance), macro liquidity conditions and volatility can amplify outcomes for leveraged positions. Market moves after earnings reports can gap beyond stop levels and lead to outsized losses when leverage is used.

Sources for the above company data were available in reporting on Fastenal’s Q4 CY2025 results and related market analysis as of the date noted.

Common regulatory and safety reminders

Read and understand margin agreements, product prospectuses and risk disclosure documents before trading.
Know your broker’s liquidation policy and who bears responsibility for losses beyond your balance.
Use account safeguards and set clear position-sizing rules.

Final thoughts and next steps

If you continue to ask “can you buy stocks with leverage?”, the technical answer is yes — there are multiple methods to obtain leveraged exposure to equities. Which method is appropriate depends on your risk tolerance, investment horizon, product knowledge and local regulation. Start with education, small positions or simulation, and clear risk-management rules.

Explore Bitget’s educational resources and the Bitget Wallet to learn product mechanics and test strategies in a controlled way. If you want to practice without immediate market risk, consider demo or simulated trading tools before committing real capital.

For actionable learning: review margin agreements, request margin/options approval from your broker, and consider conservative leverage limits as you gain experience. Always consult a qualified tax or financial professional for personalized guidance.

Ready to learn more about how leverage works and how Bitget supports traders? Explore Bitget’s education center and Bitget Wallet to take the next step safely.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.