Warrants are much similar to call options, and it will usually confer the same rights as an equity option and they can even be traded in secondary markets. Despite of all the facts, warrants have several key differences:

• Private parties issue the warrants, typically these private parties are corporation on which a warrant is based, rather than a public options exchange.

• When the warrant issued by the company is exercised, new shares of stock are issued by the company, so there would be an increase in number of outstanding shares. Where as when a call option is exercised, an existing share from an assigned call writer is received by the owner of the call option (except in the case of employee stock options, where new shares are created and issued by the company upon exercise). Unlike common stock shares outstanding, warrants do not posses voting rights.

• Warrants are considered as the over the counter instruments, and due to this reason they are often only traded by financial institutions who have the capacity to settle and clear these types of transactions.

• A lifetime of warrants is measured in years (as long as 15 years), while that of an  options are typically measured in months. Even LEAPS (long-term equity anticipation securities), that are the longest stock options available in the market have the tendency to expire in two or three years. Upon expiration, if warrants are not exercised they are worthless unless the price of the common stock is greater than the exercised price.

• Likewise exchange-listed options, warrants are not standardized. While investors are able to write stock options on the ASX (or CBOE), they are not permitted to do so with ASX-listed warrants, as only companies are able to issue warrants, and while each option contract is over 1000 underlying ordinary shares (100 on CBOE), the conversion ratio set out in the offer documentation for the warrant issue determines the number of warrants that must be exercised by the holder in order to buy the underlying asset.

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