Covered Warrant

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DEFINITION of 'Covered Warrant'

A type of warrant that allows the holder to buy or sell a specific amount of equities, currency or other financial instruments from the issuer, usually a bank or a similar financial institution, at a specific price and time.

INVESTOPEDIA EXPLAINS 'Covered Warrant'

The main differences between normal warrants and covered warrants are:

1. Covered warrants can have a wide variety of underlying financial products. Normal warrants only have a company's stock as their underlying financial product.

2. Covered warrants are only issued by financial institutions. Normal warrants are only issued by the company that issued the underlying equity.

3. Covered warrants can have a variety of exercise prices depending on the conditions set forth by each issue. Normal warrants generally have only one exercise price.

4. Covered warrants allow the warrant holder to buy or sell the underlying asset. Normal warrants allow the warrant holder only to buy the underlying equity.

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RELATED FAQS
  1. I own some stock warrants. How do I exercise them?

    Typically, stock warrants are derivative instruments added to new issues of stocks or bonds to make these issues more attractive. ... Read Full Answer >>
  2. What is a direct rights offering?

    A direct rights offering is an offer made by a company, directly to existing shareholders, granting them rights to purchase ... Read Full Answer >>
  3. Can warrants be written on any security?

    Conceptually, warrants can be written on any type of security issue. The structure of a warrant only changes the timing of ... Read Full Answer >>
  4. How are mezzanine loans structured?

    Mezzanine loans are a combination of debt and equity finance, most commonly utilized in the expansion of established companies ... Read Full Answer >>
  5. Is there a secondary market for warrants?

    Warrants can be purchased directly from a warrant issuer (primary market transaction) or through a listed exchange (secondary ... Read Full Answer >>
  6. Are warrants traded by brokers?

    In finance, warrants can be traded through a bank or brokerage. When this happens, the broker's client submits a buy or sell ... Read Full Answer >>
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