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Sharing in the action with warrants

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LAST week we mentioned a warrant and defined it loosely as a long-term option.

In addition, a warrant gives you the right to buy shares at a fixed price in the future. As with options, warrant prices are likely to move in the same direction as the underlying share price, either up or down.

One difference between an option and a warrant, is that most warrants are issued with a longer time to the expiry day, the last day on which the warrant can be exercised.

This means the investor has a longer time to bet on the value of the share going up.

Another difference is that warrants are issued by a company and hence the number available for trading depends on the issue size.

In contrast, the number of options available depends on supply and demand.

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