Leverage

The use of borrowed capital or financial instruments to amplify the potential return -- and risk -- of an investment. A trader using 2:1 margin leverage controls twice as much stock as their cash would otherwise allow, doubling both gains and losses. Leverage is the engine behind futures, options, and forex trading, and it played a starring role in nearly every major financial blowup from Long-Term Capital Management in 1998 to the mortgage crisis of 2008.