Warants vs Options

Warrants and Options are very similar. The buyer of the warrant has the right to buy (in case of a call warrant) or sell ( in case of a put warrant) an underlying asset within an predetermined price. For that right the buyer pays an predeterminded premium (price) to the seller.

However there are some differences:

• Warrants are spot market instruments. They have a security identification number
• Warrants are issued by a bank – investors in warrants have a higher settlement risk towards the issuer
• the characteristics of warrants issued by different issuers do not have to be standardized (contrary to options) – therefore warrants are less liquid
• As warrants are issued by banks the investor cant take a short position
• Options are derivatives market instruments
• Options: Short selling is possible
• Options (except OTC-Options) are issued by a futures exchange
• in the case of options and futures, the futures exchange is your trade partner, in the case of warrants a bank is your trade partner