An option that is designed to allow the buyer (holder) to take a leveraged view on a specific asset or its volatility. The payout of such an option will be magnified in relation with a particular benchmark rate, if the view proves correct.

For example, if a firm expects that LIBOR rate is about to rise over the coming quarter, it can leverage that expectations by purchasing a leveraged option that provides a leveraged payout based on the squared or cubed amount of change in LIBOR. If the market view turns out to be true, the potential payoff received by the buyer of a leveraged option would, certainly, be much higher than that on an equivalent, regular (non-leveraged) option. Likewise, the premium paid for a leveraged option also considerably exceeds that on a regular option.

The leveraged option is also called a power option.