Leverage is the principle of doing more with less.  The principle is familiar to anyone who's used a lever- put a fulcrum next to a heavy object and by pushing down with relatively little force on a long lever, you multiply your ability to move a heavier object, by dividing the distance you move it.  Leverage at it's core is a concept that's built on ratios- it's the process of using the ratios found in everyday life in order to maximize your capability to do things or to be paid.

Leverage is something of a loaded term in an emotional sense- it's a means to extend power and for those of us with unresolved issues around power and control it's got it's challenges, but it's important to understand that leverage is merely a tool- and it can be used for whatever purpose you can conceive.

It is also an excellent tool to become easy about using- because leverage is not just a tool that allows you to receive, it's a tool that allows you to impact your world in a more effective manner.

Options leverage

Options are one of my favorite forms of leverage.  An option is essentially an insurance policy on an asset, in this case we'll be talking about stock.  Say you've got $1000 to invest, and shares in XYZ company are trading at $25/share.  At current market rates, you're able to buy 40 shares.  If the price goes up $1, you can sell at $12 and now you've got $1080 (let's just ignore taxes and trading commissions for now.)  At the same time as you invested in shares of XYZ, your buddy Fred spent $1000 and bought 10 call option contracts on XYZ with a strike price at $11.  When XYZ reached $12, he exercised his options and bought at $11 and sold immediately at market price.  Fred risked $1000 and made $1000.  You risked $1000 and made $80.   You both risked $1000, but Fred used leverage.

In this case, the ratio is derived from the nature of what a call option is: it's a contract that gives Fred the right (but not the obligation) to buy 100 shares of a certain stock at a specific price within a certain timeframe.  Instead of buying ownership of the stock, he bought the option to buy it- so he was able to control a large amount of stock with a smaller amount of money.  Of course, had the stock gone down, Fred would have lost his entire investment, while you would only have lost $80.  Leverage goes both ways.

Employer leverage

1 employer : 5 employees

Debt Leverage

by assuming

Mastermind leverage

Network Leverage

Contractual leverage