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. Are warrants more desirable than options?

    Understand what stock warrants are, the differences between warrants and options, and learn whether warrants or options are ... Read Answer >>
  2. Can warrants be written on any security?

    Read about the different kinds of securities that may have warrants written on them, including which types of warrants are ... Read Answer >>
  3. Is there a secondary market for warrants?

    Find out how to trade warrants on the primary market, the secondary market and the over-the-counter market, including how ... Read Answer >>
  4. Why should investors consider the fully diluted share amount?

    Learn about the importance of considering the fully diluted shares, how it could affect a stock's share price and how dilution ... Read Answer >>
Related Articles
  1. Trading

    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.
  2. Trading

    Warrants: A High-Return Investment Tool

    Discover the advantages of this largely unexploited investment vehicle.
  3. Investing

    Warrants And Call Options

    Warrants and call options are securities that are quite similar in many respects, but they also have some notable differences.
  4. Financial Advisor

    Warrants

    Learn more about this derivative security.
  5. Investing

    Weatherford Floats New Shares, Warrants, and Notes

    Struggling energy industry services company Weatherford International (NYSE: WFT) is raising some funds the old-fashioned way -- by issuing a fresh batch of securities: The company will float ...
  6. Trading

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  7. Investing

    Plug Power Stock Surges on Expanded Wal-Mart Deal

    The stock surged after expanding a deal with Wal-Mart in which it will issue company warrants.
  8. Managing Wealth

    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. Investing

    Warren Buffett Makes $12 Billion on a Single Bank of America Investment

    Berkshire Hathaway will acquire 700 million common shares of the bank's stock.
  10. Investing

    Assess Shareholder Wealth With EPS

    Find out if management is doing its job of creating profit for investors.
RELATED TERMS
  1. Warrant

    A derivative that confers the right, but not the obligation, ...
  2. Warrant Premium

    The amount that an investor must pay above the current market ...
  3. Put Warrant

    A type of security that gives the holder the right (but not the ...
  4. Call Warrant

    A financial instrument that gives the holder the right to buy ...
  5. Piggyback Warrants

    Additional warrants that are acquired following the exercise ...
  6. Harmless Warrant

    A warrant that requires the holder to surrender a similar bond ...
Hot Definitions
  1. Covariance

    A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns ...
  2. Liquid Asset

    An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally ...
  3. Nostro Account

    A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...
  4. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  5. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  6. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
Trading Center