Warrants
A warrant is an investment which gives the holder of the warrant the right, but not the obligation, to buy a given quantity of the underlying asset from an issuer at a pre-determined price or before a certain date. The price is also known as the exercise price or the strike price and the date may be the expiration date.
Structured warrants are a type of option issued by a third-party financial institution on the shares of an unrelated company, a basket of companies' shares, or an index. Structured warrants can never be a complete substitute for the underlying asset. Because of the leverage nature of the warrant, both the potential gains and losses can be very significant.
Unfortunately, often recommendations to buy warrants are unsuitable given the customer's age, risk tolerance and investment objectives. Also, many advisors failed to fully inform their clients of the risks associated with warrants, including but not limited to Duration Risks, Credit Risks, Liquidity Risks, and others.