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Warrant

• A warrant is similar to an option, giving the holder the right to purchase securities at a set price for a specific period of time. Warrant certificates last longer than options, typically holding value for a few years or indefinitely. Warrants are often traded as securities at a price that reflects the underlying security.

• A financial instrument that gives its holder the right to purchase a certain number o common shares at a specified price within a certain period of time.

• A security that gives the holder the right to purchase securities from the issuer of the warrant at a stipulated subscription price. Warrants are usually long-term instruments, with expiration dates years in the future.

• A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This warrant is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are issued by corporations and often used as a sweetener bundled with another class of security to enhance the marketability of the latter. Warrants are like call options, but with much longer time spans --sometimes years. In addition, warrants are offered by corporations whereas exchange traded call options are not issued by firms.

• Is used differently by the securities and commodities industries. In the securities industry, it refers to a derivative instrument which has an expiration date and strike price and other exercise conditions. In the commodities industry, it refers to a receipt indicating ownership of a specific lot of a commodity.

 
 Embedded terms in definition
 Call option
Call
Class
Commodity
Common shares
Derivative
Exchange
Exercise
Expiration date
Expiration
Future
Industry
Instruments
Issuer
Marketability
Market
Options
Option
Purchase
Right
Securities
Security
Shares
Stock
Strike price
Subscription price
Sweetener
Time
Underlying security
Underlying
 
 Referenced Terms
 Covered write: Is the sale of an option against a position in the underlying instrument. Often this is the sale of a call against a long position in the stock. It could also be the sale of a put against a short position in the stock. Here, if the put is exercised, a long stock position is assigned to the seller of the option. Then this newly acquired long position is offset by the previously held short position. The covered write can also apply to Warrant and other option positions.

 Detachable warrant: A Warrant entitles the holder to buy a given number of shares of stock at a stipulated price. A detachable warrant is one that may be sold separately from the package it may have originally been issued with (usually a bond).

 Harmless warrant: Warrant that allows the user to purchase a bond only by surrendering an existing bond with similar terms.

 Host security: The security to which a Warrant is attached.

 Implied price of a warrant: The price effectively paid for each Warrant attached to a bond.

 
 Related Terms
 Covered warrant
Detachable warrant
Harmless warrant
Implied price of a warrant
Index warrant
Intrinsic value warrant
Stock purchase warrant
Warrant premium

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