Warrant

Warrants provide the right, but not obligation, to purchase company stock at a predetermined strike price before expiration. Unlike employee stock options, warrants are often publicly tradeable securities. They're typically issued by companies as part of bond or preferred stock offerings to make them more attractive, or sold separately to raise additional capital. Warrants have longer terms than most options, often several years. When exercised, companies issue new shares, creating dilution for existing shareholders. Warrants provide leverage - small changes in underlying stock price create larger percentage changes in warrant value. They offer investors exposure to stock upside with lower capital requirements but risk total loss if stock price remains below strike price.