Naked Warrant

AAA

DEFINITION of 'Naked Warrant'

A warrant that is issued without a host bond. A naked warrant allows the holder to buy or sell a particular financial instrument, such as a bond or shares, but unlike a normal warrant, it is not sold with an accompanying bond. Naked warrants are typically issued by banks or other financial institutions that are not also issuing a bond, and can be traded in the stock market.

INVESTOPEDIA EXPLAINS 'Naked Warrant'

Normal warrants are issued with an accompanying bond (a warrant-linked bond), giving the investor holding the warrant the right to exercise it and acquire shares of the company that issued the underlying bond. The company writing the bond is typically the same company issuing the underlying bond. Naked warrants, on the other hand, can be backed by a variety of underlying investments, including stocks, and are considered more flexible.

RELATED TERMS
  1. Exploding Warrant

    An equity derivative investment instrument that gives that holder ...
  2. Covered Warrant

    A type of warrant that allows the holder to buy or sell a specific ...
  3. Option

    A financial derivative that represents a contract sold by one ...
  4. Warrant

    A derivative security that gives the holder the right to purchase ...
  5. Market Risk

    The possibility for an investor to experience losses due to factors ...
  6. Underlying

    1. In derivatives, the security that must be delivered when a ...
RELATED FAQS
  1. What measures can be used to evaluate the capital adequacy of a bank?

    The most commonly used assessment of a bank's capital adequacy is the capital adequacy ratio. However, many analysts and ... Read Full Answer >>
  2. What dividend yield is typical for companies in the industrial sector?

    The average dividend yield of the industrial goods sector is approximately 1.71%. The industrial goods sector is a group ... Read Full Answer >>
  3. What is price-to-book ratio is typical in the electronics sector?

    In fundamental analysis, book value is an important concept for measuring a business's value. Book value equals total assets ... Read Full Answer >>
  4. What price-to-earnings ratio is average in the real estate sector?

    The price-to-earnings (P/E) ratio is a commonly cited valuation metric that can help investors decide what stock price is ... Read Full Answer >>
  5. How is deferred revenue treated under accrual accounting?

    In accrual accounting, deferred revenue, or unearned revenue, represents a liability on the balance sheet recorded on funds ... Read Full Answer >>
  6. As an investor in stock, how should I evaluate a company's capital employed?

    Before you evaluate a company's capital employed, you first need to nail down a consistent, working definition of capital ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    The Fundamental Mechanics Of Investing

    Here's a story that demonstrates why stocks and bonds were created and how they are valued.
  2. Options & Futures

    A User's Guide To Warrants

    These investment vehicles are relatively uncommon in the United States, but they do still appear in U.S. markets.
  3. Options & Futures

    Warrants: A High-Return Investment Tool

    Discover the advantages of this largely unexploited investment vehicle.
  4. Options & Futures

    5 Equity Derivatives And How They Work

    These derivatives allow investors to transfer risk, but there are many choices and factors that investors must weigh before buying in.
  5. Budgeting

    Extended Warranties: Should You Take The Bait?

    Avoid shelling out for these policies and you could save hundreds of dollars.
  6. Fundamental Analysis

    Online Gaming Industry Stocks

    A look at some of the top stocks in the online gaming industry.
  7. Stock Analysis

    Invest In Cyber Security With These Stocks

    Learn about some amazing cyber security plays in this hot sector.
  8. Fundamental Analysis

    Tesla Home Batteries Could Transform Your Electric Bill

    With limited daylight hours, solar power cannot power our homes at night, but Tesla Motors might help solve that problem.
  9. Fundamental Analysis

    Understanding Lululemon's Business Model

    Lululemon has succeeded in marketing more than just fitness apparel. The company has strategies for continued growth, but it faces tough competition.
  10. Home & Auto

    Buying a Home? The Best Places Share This Feature

    The most lucrative areas to invest in a home are cities where job growth is robust.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center