Warrant is basically a term of finance and it refers to the security that entitles any of the holders who like to buy the underlying stocks of some kind of the issuing companies at all the fixed exercised prices until their expiry date. Warrants are actually as similar as to the options as both of them are the contractual instruments of finance that allow all the holders with the special rights of buying the securities of their choice. Both of them have expiry dates as both of them are discrete. This is how both of them are so alike. In other words, the term warrant simply means to endow with the right that is only a little different from the meaning of the option.
Usually, these warrants are attached to some kind of bonds or the preferred stocks as well as the sweetener that allow the issuers for paying lower interest rates and also the dividends. These warrants can also be used for the enhancing of the yield of the bonds for making them more and more attractive for the potential buyers. This is the reason why these warrants are so much popular all over the world, especially in the stock markets. One of the best things about these warrants is that they can also be used in the deals of the private equity. These warrants are actually detachable and can also be sold very easily of the bond of these stocks.
On the other hand, in case of the warrants that is issued with some kind of preferred stocks. The stockholders can easily detach as well as sell their warrants before they easily receive the payments of their dividends. However, it is only beneficial sometimes to detach and sell these warrants as soon as the stockholders want for investing as well as earning the dividends. Actively, these warrants are traded in some of the financial markets ore likely in Hong Kong where in the stock exchange market of Hong Kong; all these warrants are accounted for the turnover of 11.7 percent in the first quarter of 2009.
Features of Warrants:
When it comes to the structure and features of the warrants of these stock exchange markets, following things come one after another:
-Exercise: Whenever a warrant is exercised and the holders inform the issuer about their intentions of purchasing the shares that underlie these warrants.
-Premium: The premium of the warrant represents that how much extra amount do the stockholder needs to pay for their shares when buying them through warrants.
-Gearing: This is the way of ascertaining that how much more exposure that the people have to their underlying stocks of the warrants.
-Expiry date: This refers to the date of these warrants when they expire. Anybody planning for exercising the warrants must do it before its expiry date.
-Restriction on exercise: Similarly to the options, these restrictions on exercises of the warrants different type of exercises that is associated to the warrants.