Warrants
A warrant is a contract that gives the holder the right, but not the obligation, to buy (or in some cases sell) a company's stock at a fixed price, on or before a set expiration date. In that basic shape it looks like an option, but the source of the shares is different: an option is a side contract between two traders that never involves the company itself, while a warrant is issued directly by the company (or by a bank tied to the company). When a warrant is exercised, the company creates and delivers brand-new shares, which is why warrants are counted alongside things like convertible bonds when people talk about "dilution."
Warrants trade on their own, usually under a ticker that looks like the stock's ticker with a "W" or "WS" tacked on. Their price moves with the underlying stock but also depends on how far away the fixed purchase price (the strike or exercise price) is and how much time is left before expiration; a warrant with a strike well above the current stock price and years left to run can still have value purely from the chance that the stock gets there eventually. Because of this, warrants tend to be far more volatile, percentage-wise, than the stock they're attached to.
The nuance that trips people up is where warrants actually come from and how long they last. Many retail traders first encounter warrants through SPAC deals (a SPAC is a shell company that raises money to merge with a private business and take it public); investors in the SPAC's initial offering often get warrants bundled in for free as a sweetener. These warrants can sit dormant for a long time, then suddenly become active or get called (forced to be exercised or redeemed by the company) once the stock trades above a certain price for a certain stretch — the exact price and time window are set out deal-by-deal in the warrant agreement, so there is no universal rule to memorize.
Warrants are also generally less liquid than the underlying stock, meaning the gap between what buyers are willing to pay and what sellers are asking (the bid-ask spread) can be wide, and it's easy to pay a lot more to get in or receive a lot less to get out than the last printed price suggests.
This term depends on a rule or threshold that changes over time, so no specific figure is quoted here. The definition avoids asserting specific redemption/call price thresholds and time windows for SPAC warrants since these are set per-deal and not standardized; if the glossary wants a general example figure (e.g., a commonly cited SPAC warrant redemption trigger price), that specific number should be checked against an actual current warrant agreement or SEC filing rather than assumed to be universal.
A day trader who buys a warrant instead of the common stock is often trading something thinly traded and highly leveraged to the stock's move, with a wide spread that can quietly eat into or erase intraday gains.
Suppose a SPAC-merged company's stock trades at $8, and its warrants (ticker XYZW) let the holder buy shares at $11.50 any time before a set expiration a few years out. The warrants might trade around $1.20. If the stock jumps 20% to $9.60 on news, the warrants — now closer to being worth exercising — might jump 40% or more to $1.70, but a trader trying to sell quickly may find the bid several cents below the last traded price because so few shares of the warrant change hands each day.
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