A stock warrant is a certificate issued by companies that gives the holder the right to buy a certain number of shares at a particular price within a specified time frame. There are two different kinds of stock warrants. One is called a call warrant and that is the one just mentioned. The other is called a put warrant and gives the holder the right to sell a specified amount of equity back to the issuing company within a certain time frame. On each stock warrant certificate will be written the expiry date, which is the last day that the buy or sell may take place. There are two classes of stock warrant certificates; those whose equity can be bought or sold at any time within, up to and including the expiry date, and those where the buy and sell equity can only be exercised on the actual date of expiry.

While a stock warrant mostly represents shares in a company, it can also represent other investment types such as currency, index or commodity. When the stock warrant is bought or sold, the price paid is called the exercise or strike price. It is usually much lower than the normal price of the shares represented. The stock warrant is a high-risk, high return investment tool. Those considering investing in stock warrants should realize that their losses can be much greater if things go wrong than if they invested in ordinary shares.