Leverage allows you to increase your exposure to the markets beyond the size of your balance. If you want to get started trading with leverage, check out this guide: Trading with Leverage.

While leverage opens up a world of possibilities for traders, you have to remain mindful of the fees attached with increasing your exposure. Aside from increased spreads, interest on a leveraged trades can also impact your performance and profitability.

Margin Interest
Like in traditional financial markets, there is a cost associated with borrowing funds to increase your exposure. This leverage fee is deducted as an ongoing interest rate.

On Morpher, all positions with leverage incur a daily, non-compounding fee of 0.015% net exposure.

The basic math for interest costs: (leverage - 1) x 0.015% x (days position held)
How It Works
The interest is automatically deducted from the value of your position. This is a non-compounding interest rate, so the rate doesn't change. Since the interest rate is added daily, holding leveraged positions for longer results in paying more total interest. Similarly, since the rate is based on net exposure, positions with bigger leverage pay more interest.

Margin Interest Example
Let’s walk through an example: you buy AAPL stock with a leverage of 2, and sell your position after one year. In that one year, you would have accumulated 5.6% in interest. Meanwhile Apple was up 68% last year.

Your returns with no leverage: 68%
Your returns with 1.5x leverage: (1.5 x 68%) - 2.8% = 100%
Your returns with 2x leverage: (2 x 68%) – 5.6% = 130%
Your returns with 3x leverage: (3 x 68%) – 11.2% = 193%
Your returns with 10x leverage: (10 x 68%) – 50.4% = 630%

Ways to Reduce Fees
Use less leverage.
Don't keep trades open for a long time.

Negative Balance Protection
As with all Morpher trades, you can never lose more than what you invest. The margin interest is deducted from the value of your position. You do not need to maintain any balance to cover the margin interest. If your position liquidates their are no fees collected.

Existing Leveraged Positions
The margin interest update is effective from March 30th 2021. Leveraged positions opened before this date only start paying interest from March 30th onward.

Morpher doesn't profit off fees. Both spreads and margin interest tokens are burned. Read more about token burning and minting
Was this article helpful?
Thank you!