Short rebate
Definition · Level 3 · Spreads & short options
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The interest a broker pays on the cash from a short sale, usually less a borrow fee. It is part of a reversal’s profit.
Example
Short $100 of stock for three months at 4% → about 1.00 of interest.
Where Tradecraft teaches it
Level 3 · Spreads & short options, in the lesson “The reversal & the short synthetic”: The conversion’s mirror, how a parity gap is captured, and why locked is not riskless.
Related terms
- Parity arbitrageLocking in a mispricing between options and stock with a conversion or reversal; the edge is usually cents and can be eaten by financing, dividends…
- ReversalShort the shares, buy a call and sell a put at the same strike.
- Back-spread danger zoneWhere a back spread loses the most at expiry: the stock sitting at the long strike.
- BodyThe middle strike of a butterfly, short in a long fly: where a long fly earns the most at expiration.
- Breakeven win rateHow often a trade must win just to net zero, treating each outcome as a full win or a full loss: max loss ÷ (max profit + max loss).
- Broken-Wing ButterflyA butterfly with one wing pushed out: buy one call, sell two, and buy one much further away, so the two wings are different widths.