What main advantage does gearing provide in the context of CFDs?

Gearing, or leverage, in the context of Contracts for Difference (CFDs) allows investors to control a more significant position than they could with their own capital alone. This means that a relatively small amount of invested capital can result in a proportionally larger exposure to market movements. When the market moves in the investor's favor, the returns on investment are indeed amplified due to this leverage. For instance, if an investor uses gearing to invest in CFDs and the asset they are trading increases in value, the profit realized will be much higher relative to the initial capital input compared to a non-geared investment.

This amplification effect is a central feature of gearing, as it enables potentially larger profits without needing to commit additional capital. However, while it offers enhanced potential for returns, it's important to recognize that it also increases the risk of losses, which is why understanding and managing leverage is crucial in CFD trading. The other options either misrepresent the nature of gearing or emphasize specific aspects that do not capture its primary benefit effectively.