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KembaraXtra – Islamic Derivatives: Quick Trick to Identify Option vs Warrant (Exam Shortcut)
🔹 The Fastest Way to Differentiate
👉 Ask yourself this question:
❓ “Does the company issue it?”
🔹 Trick 1: Source of Shares
👉 If new shares are created → Warrant
🔹 Trick 2: Effect on Shares Outstanding
👉 Increase in shares → Warrant
🔹 Trick 3: Where It Trades
🔹 Trick 4: Purpose
🔹 Super Simple Memory Trick
👉 “Company = Warrant, Market = Option”
🔹 Final 1-Line Exam Answer
👉 “Options are market-traded contracts between investors, while warrants are issued by companies and result in the creation of new shares upon exercise.”
🔹 The Fastest Way to Differentiate
👉 Ask yourself this question:
❓ “Does the company issue it?”
- ✔ YES → Warrant
- ❌ NO → Option
🔹 Trick 1: Source of Shares
- Option:
- Shares come from other investors
- Warrant:
- Shares come from the company (new shares created)
👉 If new shares are created → Warrant
🔹 Trick 2: Effect on Shares Outstanding
- Option:
- ❌ No change
- Warrant:
- ✔ Increases number of shares
👉 Increase in shares → Warrant
🔹 Trick 3: Where It Trades
- Option:
- Traded in market between investors
- Warrant:
- Issued by company (often with bonds)
🔹 Trick 4: Purpose
- Option:
- Trading / speculation / hedging
- Warrant:
- Raise capital for company
🔹 Super Simple Memory Trick
👉 “Company = Warrant, Market = Option”
🔹 Final 1-Line Exam Answer
👉 “Options are market-traded contracts between investors, while warrants are issued by companies and result in the creation of new shares upon exercise.”
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