Rebate

AAA

DEFINITION of 'Rebate'

1. In a short-sale transaction, the portion of interest or dividends earned by the owner (lender) of shares that are paid to the short seller (borrower) of the shares.

2. In an options transaction, the amount paid to the holder of the option if the option expires worthless.

BREAKING DOWN 'Rebate'

1. The lender and borrower usually negotiate the rate at which the short seller will be compensated.

2. The rebate is pre-negotiated and is usually a portion of the premium paid by the option holder.

RELATED TERMS
  1. Kickback

    The payment of something of value to an individual with the goal ...
  2. Short Selling

    The sale of a security that is not owned by the seller, or that ...
  3. Bribe

    An illegal payment from one party to another, usually in return ...
  4. Short Sale

    A market transaction in which an investor sells borrowed securities ...
  5. Rebate Barrier Option

    A financial derivative product that will automatically expire ...
  6. Derivative

    A security with a price that is dependent upon or derived from ...
Related Articles
  1. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  2. Personal Finance

    Ways To Slash Your Home Energy Bill

    Upgrading household appliances to more energy-efficient models can slash your utilities bill.
  3. Options & Futures

    9 Ways To Save On Winter Bills

    Winter heating bills can leave your finances in the cold. These tips will help warm things up.
  4. Active Trading Fundamentals

    Short Selling Tutorial

    Want to profit on declining stocks? This trading strategy does just that.
  5. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  6. Stock Analysis

    Investors Need to Stop Shorting GoPro. Here's Why

    Discover why investors should stop shorting GoPro. GoPro has been one of the fastest-growing companies since 2005 with many betting against more growth.
  7. Chart Advisor

    Stocks to Short...When the Dust Settles

    Four short trades to consider, but not quite yet. Let the dust settle and wait for a pullback to resistance for a higher probability trade.
  8. Stock Analysis

    3 Reasons to Short Monster Beverage

    Learn why, despite the popular perception of Monster Beverage as a high-growth stock, investors may be better off taking a short position on it.
  9. Home & Auto

    When Getting a Rent-to-Own Car Makes Sense

    If your credit is bad, rent-to-own may be a better way to purchase a car than taking out a subprime loan – or it may not be. Get out your calculator.
  10. Trading Strategies

    Are You a Trend Trader or a Swing Trader?

    Swing traders and trend traders execute market timing strategies that require different skill sets.
RELATED FAQS
  1. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  2. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  3. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
  4. What is the difference between derivatives and options?

    Options are one category of derivatives. Other types of derivatives include futures contracts, swaps and forward contracts. ... Read Full Answer >>
  5. How are rights distributed in a rights offering?

    In a rights offering, rights are distributed to shareholders based on the number of shares they already own. What Is a Rights ... Read Full Answer >>
  6. What risks should I consider taking a short put position?

    The risks to consider before taking a short put position are the odds of sustained weakness in the asset price and a spike ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  2. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  3. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  4. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  5. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  6. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!