The characteristics of derivatives which allow the holder to achieve a much greater reward, or otherwise incur a far greater loss, for the same, or a much smaller, initial investment outlay. Gearing is expressed as the ratio of exposure to investment outlay. For instance, an outlay of $10 enables an investor to have an exposure of, and therefore control, $100 investment. A such, the gearing is said to be 100/ 10= 10.
In its specific meaning, gearing may also refer to the price of the underlying of an option divided by the price of the option (call or put).
