What is Leverage?

Leverage is the ratio of a position’s notional value to the collateral backing it. At 5× leverage, $2,000 of margin controls $10,000 of exposure.

Higher leverage amplifies everything proportionally: funding earned, fees paid, and — critically — how small a price move triggers liquidation. It does not change the funding rate itself, only the size of position your capital can hold.

In funding arbitrage the two legs cancel directional risk, so traders sometimes run higher leverage than on a directional bet — but each leg’s independent liquidation price still caps safe leverage.