The size of the position in your account is what determines your P&L. Gemini allows you to purchase a larger size position for the same amount of capital - this is the notion of leverage.
- If you bought 1 BTC at $10,000, you have exposure to $10,000.
- However, you could buy 5 BTC, equivalent to $50,000 exposure through perpetuals but still only using your $10,000 of capital. This would be using 5x leverage. Given you have 5x as much exposure, your P&L will be 5x as big.
- If BTC were to go up $100 to $10,100 then you would have made $100 or 1% on your spot position. However, your perpetual position would be worth $55,500 and you have made 500 or 5% on your capital. Note that for the sake of simplicity, any potential funding payments have been ignored.