Warrant (finance) - Types of Warrants

Types of Warrants

A wide range of warrants and warrant types are available. The reasons you might invest in one type of warrant may be different from the reasons you might invest in another type of warrant.

• Equity warrants: Equity warrants can be call and put warrants.
  • Callable warrants: Callable warrants give the Company the right to force the warrant holder to exercise the warrants into their predetermined number of shares at a predetermined price (or using a predetermined price formula) after certain contractual conditions are met
  • Putable warrants: Putable warrants give the warrant holder the right to force the Company to issue the underlying securities at a predetermined price after certain contractual conditions are met
• Covered warrants: A covered warrants is a warrant that has some underlying backing, for example the issuer will purchase the stock beforehand or will use other instruments to cover the option.
• Basket warrants: As with a regular equity index, warrants can be classified at, for example, an industry level. Thus, it mirrors the performance of the industry.
• Index warrants: Index warrants use an index as the underlying asset. Your risk is dispersed—using index call and index put warrants—just like with regular equity indexes. It should be noted that they are priced using index points. That is, you deal with cash, not directly with shares.
• Wedding warrants: are attached to the host debentures and can be exercised only if the host debentures are surrendered
• Detachable warrants: the warrant portion of the security can be detached from the debenture and traded separately.
• Naked warrants: are issued without an accompanying bond, and like traditional warrants, are traded on the stock exchange.