A:

Typically, stock warrants are derivative instruments added to new issues of stocks or bonds to make these issues more attractive. The warrants are extra benefits that give their holders the right to buy stock within a company. Unlike call options, warrants are longer-term and backed by the issuing company rather than the Depository Trust Company. However, like call options, warrants can be traded freely in the open market after their initial issue and before their expiry date.

If you own warrants, regardless of how you purchased them, the easiest way to exercise them is through your broker, who will handle much of the paperwork and correspondence with the company that issued the warrant to you. All you need to do is give the warrants to your broker and instruct him or her as to what you would like to do. Alternatively, you can contact the issuing company directly, and they will then instruct you on how to exercise your warrants. Dealing directly with the company, however, will be a little more time consuming.

RELATED FAQS

  1. Why would a company issue a rights offering?

    Understand more about a rights offering, and learn the most common reasons a company might have to issue a rights offering, ...
  2. What is the difference between share purchase rights and options?

    Discover the difference between share purchase rights and options, which are essential to understand when deciding to invest ...
  3. What is the difference between an option-adjusted spread and a Z-spread in reference ...

    Learn about the difference between the Z-spread and option-adjusted spread valuations of future cash flows for bonds, and ...
  4. In what ways can a sinking fund affect bond returns?

    Find out how a bond sinking fund provision impacts the likely returns on a corporate bond, and learn why investors should ...
RELATED TERMS
  1. Exchange Traded Derivative

    A financial instrument whose value is based on the value of another ...
  2. Catastrophe Equity Put (CatEPut)

    Catastrophe equity puts are used to ensure that insurance companies ...
  3. Open Trade Equity (OTE)

    Open trade equity (OTE) is the equity in an open futures contract.
  4. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
  5. Short Put

    A type of strategy regarding a put option, which is a contract ...
  6. Wingspread

    To maximize potential returns for certain levels of risk (while ...

You May Also Like

Related Articles
  1. Options & Futures

    Why Is Best Buy Stock So Volatile?

  2. Trading Strategies

    A Guide Of Option Trading Strategies ...

  3. Options & Futures

    Options and Roth IRAs: Do's and Don'ts

  4. Options & Futures

    Trade Covered Calls On High Dividend ...

  5. Mutual Funds & ETFs

    How do I invest or trade market indicators?

Trading Center