Leverage

In most fixed-term transactions it is not necessary to deposit the total value of the underlying asset, but only a certain fraction (initial margin). A relatively small percentage change of the price of the underlying asset causes several times higher percentage change of the price of the particular derivative and thus of the investment made in the fixed-term transaction at its conclusion. With a relatively low initial investment, the investor can achieve substantial profit or even loss, the amount of which is determined by the type of the fixed-term contract (e.g. options or futures).