DEFINITION of 'Put Warrant'

A put warrant is a type of security that gives the holder the right (but not the obligation) to sell a given quantity of an underlying asset for a specified price on or before a specified date. A put warrant is a company-issued option to sell back to the issuer a specified number of shares of the company's common stock at a particular price sometime in the future.


There are two types of warrants — put warrants and call warrants. All warrants have an expiration date — the last day that the rights of the warrant can be exercised. If a warrant is not exercised before the expiration date, it becomes worthless. A put warrant's exercise price (also called the strike price) is the price at which the holder can sell the warrant. Both put and call warrants are classified by their exercise style. American warrants can be exercised anytime on or before the expiration date; European warrants can only be exercised on the day of expiration. Investors can use put warrants to hedge against falling share values of stock held in their portfolios.

Similarities and Differences Between a Put Warrant and Put Option

Both put warrants and put options give the holder the right (but not obligation) to sell an underlying stock on or before expiration date at a strike price. They will be "in-the-money" if the price of the underlying stock is below the exercise price. Conversely, they will be "out-of-the-money" if the price of the stock is above the strike price. However, unlike options, which are traded on an exchange among investors, warrants are issued by companies and if investors exercise the put warrants, they sell them back to the companies. Another fundamental difference between a put warrant and put option is that the expiration term for a warrant can last up to 15 years. Option expiry dates are much shorter; the vast majority are within 12 months.

  1. Call Warrant

    A call warrant is a financial instrument that gives the holder ...
  2. Warrant Premium

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

    An agreement between a company and its shareholders whereby the ...
  4. Naked Warrant

    A warrant that is issued without a host bond. A naked warrant ...
  5. American Option

    An option that can be exercised anytime during its life. American ...
  6. Undetachable Stock Warrant

    A right attached to a bond that can be redeemed for stock, but ...
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. Investing

    Investing In Stock Rights And Warrants

    Learn why many companies choose to issue rights or warrants as an alternative means of generating capital and how their value is determined.
  3. Trading

    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.
  4. Trading

    How to Sell Put Options to Benefit in Any Market

    As long as the underlying stocks are of companies you are happy to own, put selling can be a lucrative strategy.
  5. Trading

    4 Reasons To Hold Onto An Option

    There are times when an investor shouldn't exercise an option. Find out when to hold and when to fold.
  6. 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.
  7. Trading

    Exploring European Options

    The ability to exercise only on the expiration date is what sets these options apart.
  8. Investing

    Plug Power Prices $30M Stock Offering

    The offerings, due to close on Dec. 22, will go toward the prepayment of an outstanding loan.
  9. Investing

    Assess Shareholder Wealth With EPS

    Find out if management is doing its job of creating profit for investors.
  10. Trading

    Three Ways to Profit Using Call Options

    A brief overview of how to provide from using call options in your portfolio.
  1. How are stock warrants different from stock options?

    Stock option and stock warrant may have similar function. However, company uses these two financial instruments for different ... Read Answer >>
  2. 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 >>
  3. After exercising a put option, can I still hold my option contract in order to sell ...

    Once a put option contract has been exercised, that contract does not exist anymore. A put option grants you the right to ... Read Answer >>
Hot Definitions
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  2. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  3. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center