# Skew Incentive

Skew Incentive is a loss rebate mechanism that rewards traders who help balance market skew. When open interest on one side of a trading pair (longs vs shorts) is larger than the other, the market is "skewed."

**How It Works**

Traders who open positions on the underweight side help rebalance the market. If these qualifying positions close at a loss, a percentage of that loss is automatically returned to them.

**Eligibility Requirements**

At position open:

* Position must be on the underweight side
* Position must meet minimum collateral requirements
* Position cannot flip the skew: the opposite side must remain at or above 49.99% after the position is opened

At position close:

* Position must close at a loss
* Feature must remain enabled

**Rebate Calculation**

The rebate is calculated as: `gross P&L × effective rate`

Where [gross P\&L](https://lynx-finance.gitbook.io/lynx-finance/for-users/broken-reference) is the P\&L from the position's performance calculated from entry to exit price movements (excluding funding/interest payments & all trading fees).

{% hint style="info" %}
The rebate is applied only to the gross P\&L. Trading fees are charged separately and are not included in the rebate calculation.
{% endhint %}

The rebate is taken from the amount that would normally go to the liquidity pool. Instead of the full loss going to the pool, a portion is returned to the trader.

{% hint style="warning" %}
You never get incentivized for anything past the 50% middle point. If your position pushes the opposite side below 49.99%, you flip the skew and receive no incentive.

If the opposite side drops to 49.99% or lower after your position opens, your entire position is disqualified from any rebate. You didn't balance the market, you just reversed the problem.
{% endhint %}

### Final Example

Market is 70% long / 30% short. Trader opens a short position with $500 collateral, qualifying for the **maximum 5% incentive rate** since the position doesn't flip.

Position closes with a $200 gross P\&L loss:

* Rebate = $200 × 5% = $200 × 0.05 = **$10**
* Trader receives $10 back
* **Net loss: $190 instead of $200**

Note: All Trading fees are charged separately and do not affect the rebate calculation.