Company Warrants

What are Company Warrants?

Company warrants are issued by companies on their own ordinary shares to raise capital for themselves. Their value depends on the value of the ordinary share which is the underlying security.

Warrants cost a fraction of the price of their underlying security and give the buyer the right (but not the obligation) to buy this underlying security at a predetermined price (the Strike or Exercise Price) on or before a predetermined date (the "Expiry" Date).

How do Company Warrants work?

Warrants give the same economic exposure to an underlying security without actually owning it, and cost a fraction of the price of the underlying security.

At the exercise date you can choose to buy the underlying security at the pre-determined price (strike or exercise price). At this point you will know what the actual value of the shares are. If you choose to buy the underlying security this is known as exercising the warrant (or exercising the rights attributed to that warrant).

How risky are Company Warrants?

The value of a warrant is determined by these factors:

  • The underlying security price.
  • The exercise price of the warrant.
  • The volatility of the underlying security price.
  • The time to expiry of the warrant.
  • The interest rate and the dividend yield of the underlying asset.

Liquidity risk
If there are insufficient buy orders, the market price of a warrant will be affected. There is a risk that you could not sell your warrants for a reasonable price.

Limited life of warrants
A warrant may become worthless if your expectations are not realised before it's expiry.

What does trading in Company Warrants cost?

Company Warrantss are traded like shares and are charged at normal online commission rates, which start from just £5.95. See full rates and charges.

Which account should I choose to invest in Company Warrants?

You can invest in Company Warrants through our Trading or SIPP accounts.

Existing customers

You can upgrade your account online to trade in Company Warrants login and go to Account Administration/Account Upgrades.

Start Investing in Warrants

TD offers a range of accounts which can be used to invest in warrants:

Risks

  • CFD: Leveraged products such as Contracts for Difference carry a high degree of risk to your capital, consequently losses can quickly and substantially exceed your initial investment. You may lose more than your initial investment and you may also need to make further margin payments. Contracts for Difference are not suitable for all investors, you should therefore ensure you fully understand the risks involved and seek independent advice if necessary.
  • TAX EFFICIENT PRODUCTS: Please note the tax treatment of these products depends on the individual circumstances of each customer and may be subject to change in future.
  • CAPITAL GAINS TAX/STAMP DUTY: Tax laws may change and are subject to individual circumstances.
  • CGT for FSB: You should be aware that, whilst profits made from Spread Betting are not subject to Capital Gains Tax (CGT), you are unable to offset any losses against capital gains for CGT purposes

About TD Direct Investing

Discover why so many clients trust us to help them get the most from their money.