Glossary

A warrant is a financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset (typically a stock) at a specific price, known as the exercise price, before a predetermined expiration date. 📅

Warrants are often issued by companies alongside bonds or preferred stocks to make these investments more attractive to investors. Warrants are similar to options, but they are directly issued by the company, rather than traded on an exchange.

Example: Company ABC issues a warrant that allows the holder to buy one share of its stock for £10 within the next 5 years. If the stock price rises above £10, the warrant holder can exercise the warrant, buy the stock at £10, and then sell it at the higher market price for a profit.

Fun fact: Warrants can have an extended expiration period, sometimes up to 15 years, whereas stock options typically expire within a few months to a couple of years. This longer time horizon can offer warrant holders more opportunities to benefit from potential price movements. ⏳