What is a warrant?

Warrants are issued by companies and by this action they allow investors to buy stocks at a fixed price during a preset time table or there are cases where a time limit isn’t set. The main purpose of these warrants are to sell stock to investors which might be paying a lower interest rate or dividends. These warrants become more attractive as the issuing company looks more promising. When investors buy warrants they usually buy it well over market price. For example if the stock which is trading currently on $25 a piece and the warrant gives the investor the right to purchase stocks at the price of $50 in the next 5 years. If the price goes over $50 then the investor can use his warrant and sell off the stocks and gain profit however if the time expires and the price doesn’t go over $50 then the warrant will be null. Warrants are shown on the market with “wt” following the stock symbol and these can be traded independently of the underlying stock.