Skip to main content
Message Font: Serif | Sans-Serif
No. of 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.
Print the post  


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.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.