How this number is made
Gross exposure adds the long book and the short book. Net exposure subtracts the short book from the long book. Leverage divides those by the equity in the account. A market-neutral book can have a small net and a large gross. The shorts are typed as a positive market value. The page does the subtracting.
- Use market value, not cost.
- Equity is capital, not the long book. If the account is all cash and no positions, gross and net are zero.
Formula
Gross = long + short. Net = long − short. Gross leverage = gross ÷ equity. Net leverage = net ÷ equity.
Worked example
With the figures already in the form, gross leverage is 160%.
Questions
Why is a short a positive number?
So the form does not depend on a minus sign. The net row subtracts it.
Does this include options?
Only if you type a delta-adjusted market value yourself. A listed premium is not the exposure.