A derivative security issued by the company, entitling the holder the right to purchase specific amount of securities at specified price and within specified time period.

Warrants are often issued along preferred stocks or bonds representing incentives, in order to stimulate investors to participate in new debt issue or Initial Public Offering. Warrants enable its holders to buy new securities at determined exercise price, which is usually higher than the market price at the time of issuance. Warrant holder may decide to exercise warrants when market price of underlying security rise above warrant exercise price, buy stocks, sell them immediately and experience profit that way.

Warrants are commonly traded on option exchanges as separate entities. As you see, warrants are similar to call options, except warrants are issued by companies and have lifetime from several years to forever, while call options are not issued by companies and have lifetime measured in months.