The characteristics of derivatives which allow the holder to achieve a much greater reward, or otherwise incur a far greater loss, for the same, or a much smaller, initial investment outlay. Simple gearing is expressed as the ratio of exposure to investment outlay. For instance, an outlay of $10 enables an investor to have an exposure of, and therefore control, $100 investment. A such, the simple gearing is said to be 100/10= 10.
In its specific meaning, simple gearing may also refer to the price of the underlying of an option divided by the price of the option (call or put).
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