I recently opened a CFD position in the ticker: GHIV. In the instrument details, it has been mentioned it has 1:5 leverage. (Attached screenshot).
I opened 5 positions, so should it not be 25 positions in total (considering the 1:5 leverage)?
The current P/L accounts for only 5 positions and not the remaining leveraged positions. Can someone please clarify.
The leverage is applied to the money.
Say a stock is £100 to buy normally. If the leverage ratio is 1:5, then by spending £20, you can effectively purchase a stock worth £100. Likewise, if the margin is dropped to 1:2, to purchase that same stock, you would now have to pay £50.
It’s not related to how many you buy, but the amount of money spent on acquiring those stocks.
So you have purchased 5 shares, your P/L will be representative of owning those 5 shares. If you want 25, you need to buy 25 shares.