Warrant

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DEFINITION of 'Warrant'

A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue as a "sweetener" to entice investors.

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BREAKING DOWN 'Warrant'

The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months.

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RELATED FAQS
  1. Why should investors consider the fully diluted share amount?

    Investors should consider a company's fully diluted share amount before purchasing the company's stock, because it could ... Read Full Answer >>
  2. Why is a company's diluted EPS always lower than its simple EPS?

    A company's diluted earnings per share is lower than its basic earnings per share because diluted earnings per share takes ... Read Full Answer >>
  3. 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 >>
  4. Are warrants more desirable than options?

    Warrants are typically considered less valuable than options, although they do offer the advantage of having significantly ... Read Full Answer >>
  5. 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 >>
  6. How did Peter Young gain infamy as a "rogue trader"?

    Peter Young's notoriety as one of the most memorable rogue traders is not a result of the amount of money he stole, but the ... Read Full Answer >>
  7. 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 ... Read Full Answer >>
  8. 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 >>

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