What are the advantages and disadvantages of options vs. warrants?
Warrants can be bought in any quantity, theoretically even for a few cents. However, often there are no appropriate warrants for smallcaps. Options, on the other hand, can only be had in packets of 100 ("contracts") which could mean a hefty investment of several thousand dollars. But what about time decay, dependency on volatility etc.? So far, I've only traded warrants. Who can give me good reasons to switch to a broker that also offers access to options?
Answers
788 points
DaveDiggz answered one year ago …
Well, as you know, the lifetime of warrants are usually much longer than that of options - so options are better for short term trading in general. Warrants are also guaranteed by the company that issued them, while options are more speculative - therefore, you're taking a bigger risk but also seeing a greater potential reward.
I don't know if anybody can "convince" you to start trading options, only research and deciding if you're the type of trader who can handle a lot of short term volatility, is the only way you'll be able to know if trading options is right for you.
Good luck.
249 points
engcomp answered one year ago …
Warrants give the warrant holder the right to buy from or, less common, to sell to (put warrant), the warrant issuer the warranted security at an agreed price. The value of a warrant can be calculated in the same way as the value of an option is calculated. One of many option pricing models is Black-Scholes (see http://www.futuresandforex.info/strategies1.shtml).
Options have a huge advantage over warrants because they allow numerous strategies to be developed due to the fact that options come in a range of strike prices and a range of expiry dates in both call options and put options.
