What Is A Warrant?

A warrant is a security that gives the holder the right to purchase a company's stock or bond at a specific price by a certain date.

Warrants are similar to options, but warrants are issued directly by a company, usually as an incentive to get investors to buy the company's stock or bonds. Options, by contrast, are a contract between two parties in which the holder has the right to buy a security or asset at a specific price and time. Warrants generally are effective for as long as 15 years, while options are short-term contracts that usually last for less than a year.

Warrants have no voting or dividend rights. If the warrants are exercised, the company must issue new stock or bonds.

How Do Warrants Work?

The most notable example of how warrants work is when Berkshire Hathaway agreed to buy $5 billion of preferred stock from Bank of America during the financial crisis in 2011, at a time when the bank's future was in serious doubt.[1] As part of the deal, Berkshire was given warrants to buy 700 million shares of the bank's common stock at a price of US$7.14 a share.

At the time, the bank's shares were trading at about US$7 a share, meaning the warrants were essentially worthless. However, in 2017, when the bank's shares had more than tripled to US$24, Berkshire exercised the warrants, earning a US$12 billion profit and becoming the bank's largest shareholder in the process.[1]

Put And Call Warrants

There are two types of warrants. Call warrants are the most common, and they give the holder the right to buy shares at a certain price in the future. And then there are put warrants, which give the holder the right to sell their shares back to the company at a predetermined price. In the first case, the investor would profit if the price of the underlying stock went up, while the put warrant would provide downside protection if the price went down.

Why Trade Shares with FXCM?

  • $0.00 Commission*
  • Mini Shares - Fractional Share Trading with minimum trade sizes of 1/10 of a share.
  • Low Margin Requirements


Warrants are securities that give the owner the right to buy a company's stock or bonds at a predetermined price at a specified future date. Warrants are similar to options except that they are issued directly by a company, usually as an inducement to buy the company's shares or bonds.

FXCM Research Team

FXCM Research Team consists of a number of FXCM's Market and Product Specialists.

Articles published by FXCM Research Team generally have numerous contributors and aim to provide general Educational and Informative content on Market News and Products.



Retrieved 23 Jul 2019 https://www.bloomberg.com/news/articles/2017-06-30/buffett-to-swap-5-billion-bofa-shares-for-17-billion-of-stock

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}

When executing customers' trades, FXCM can be compensated in several ways, which include, but are not limited to: spreads, charging commissions at the open and close of a trade, and adding a mark-up to rollover, etc. Commission-based pricing is applicable to Active Trader account types.

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.