Why do derivatives have high leverage?

Derivatives have high leverage because they allow investors to control a large position in an underlying asset with a relatively small amount of capital. This is achieved through the use of margin, where only a fraction of the total value of the position needs to be deposited upfront. As a result, small price movements in the underlying asset can lead to significant gains or losses, amplifying both potential returns and risks. This characteristic makes derivatives appealing for speculative trading but also exposes investors to the possibility of substantial financial losses.