"Collective2 calculates the maximum leverage used by a strategy in each day. We then display the average of these measurements (i.e. the average daily maximum leverage) and the greatest of these measurements (maximum daily leverage).
Leverage is the ratio of total nominal value controlled by a strategy divided by its Model Account equity. Generally higher leverage implies greater risk.
Example of calculation:
The Strategy buys 100 shares of stock at $12 per share.
The Model Account equity during that day is $5,000.
The leverage is: $1200 / $5,000 = 0.24
This is a useful measurement, but it should be considered in context. This measurement doesn’t take into account important factors, such as when multiple positions are held that are inversely correlated. Nor does the measurement take into account the volatility of the instruments being held.
In addition, certain asset classes are inherently more leveraged than others. For example, futures contracts are highly leveraged. Forex positions are often even more leveraged than futures."