The Worth of a Warrant (3)

Warrant (3)


For example,

when you buy a warrant for a share of a company, you pay the price of the warrant (say, $0.50 per unit), which is usually much lower than the price of the share.

The warrant gives you

the right,

during the exercise period,

to subscribe to the share at a fixed price of, say, $2 each share.

If the prevailing price of the share rises to more than $2, you might decide to exercise your right and buy the share at the agreed price of $2.