UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev | Next
Author: NODWfool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2211  
Subject: Re: warrants vs. stocks - questions - Date: 3/6/2000 12:05 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Hi all - I have a lot of questions regarding warrants

A warrant is the right to buy a stock at a specified price (up until the warrant expires).

Let's say Stock A was selling for $50, and you had a warrant that lets you buy the stock at $45/share... The warrant will perhaps sell for around $5.

You don't buy the warrant with the goal of trading it in for the "real" stock. What you are hoping is that the price of the common stock rises to $55 per share, and then the warrant is worth $10 per share. Had you purchased the stock, you return would have been 10% - with the warrant, your return is 100%.

Just remember that leverage works both ways - if the stock went down to $45, the warrant will lose most (but not all) of its value.

A warrant has some similarities to a "Call Option", except that it is issued by the company itself, and generally has a much longer life.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev | Next


Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Berkshire Hathaway

Buffett's Biggest Mistake
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.