what are stock warrants and how do they work

Stock warrants are financial instruments that give the holder the right, but not the obligation, to buy a specific number of shares of a company's stock at a predetermined price, known as the exercise or strike price, within a certain timeframe. They function similarly to stock options but with some key differences, including typically longer durations and issuance directly by the company. Holders of stock warrants can benefit if the market price of the underlying stock rises above the exercise price, as they can exercise the warrant to buy shares at the lower price and potentially sell those shares at the higher market price. If the stock price does not exceed the exercise price during the warrant's life, the warrant may expire worthless. Warrants can usually be traded in the market, so holders can also choose to sell them instead of exercising. To exercise a stock warrant, the holder follows a process involving reviewing the terms, contacting the issuer or broker, paying the exercise price, and then receiving the shares. Warrants often come with expiration dates after which they are invalid. In summary, stock warrants provide an opportunity to invest in a company's stock with leverage and potential upside, but carry the risk of expiring worthless if stock prices do not move favorably.