Investopedia

Call Warrant

Filed Under »
Dictionary Says

Definition of 'Call Warrant'

A financial instrument that gives the holder the right to buy the underlying share at a specific price, on or before a specified date. Call warrants are often included in a new equity or debt offering from a company, in order to provide an added inducement to potential investors. Call warrants are usually detachable from the accompanying stock or bond certificate and trade separately on major stock exchanges.

Also known as a warrant.

Investopedia Says

Investopedia explains 'Call Warrant'

The price at which the warrant holder can buy the underlying stock is called the exercise price or strike price. This strike price is often set "out-of-the-money," i.e., it is fixed at a certain percentage above the current trading price of the underlying stock.

The inclusion of a call warrant feature may enable the company to lower the cost of its debt. The risk of potential equity dilution to the issuer, in the event of all the warrants being exercised, is more than offset by the additional equity capital available to the company at no additional cost, an especially important consideration during periods of severe stress in financial markets.

While a call warrant has a strike price and expiration date just like an option, there are some fundamental differences between the two. Warrants are issued by companies, while exchange-traded options are listed by an exchange. Warrants also have much longer expiration periods than options.

Articles Of Interest

  1. Warrants: A High-Return Investment Tool

    Discover the advantages of this largely unexploited investment vehicle.
  2. How are stock warrants different from stock options?

    A stock option is a contract between two people that gives the holder the right, but not the obligation, to buy or sell outstanding stocks at a specific price and at a specific date. Options ...
  3. Warrants

    Learn more about this derivative security.
  4. Are High-Yield Bonds Too Risky?

    Despite their reputation, the debt securities known as "junk bonds" may actually reduce risk in your portfolio.
  5. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, index or security. Common underlying instruments include: bonds, commodities, ...
  6. Find Investment Quality In The Income Statement

    Use these key attributes to uncover top-level investments.
  7. The 5 Types Of Earnings Per Share

    A look at the five varieties of EPS and what each represents can help an investor determine whether a company is a good value, or not.
  8. Top Perks Warren Buffett Gets When Purchasing Equities

    Learn about the many investment perks that Buffett enjoys and the rest of us can only try to imagine.
  9. The Dangers Of Share Dilution

    Investors need to be aware of the existence of dilutive securities and how they can affect existing shareholders.
  10. When Warranties Aren't Worth It

    Before you fork over the extra cash for the extended warranty, find out what kind of return you can expect.
comments powered by Disqus
Marketplace
Hot Definitions
  1. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.
  2. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.
  3. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.
  4. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.
  5. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
  6. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
Trading Center