warrant premium

Warrant Premium

The premium paid for the rights associated with a warrant.

Notes:

Like a derivative option, warrants will have an intrinsic value and extrinsic value. For a warrant, the intrinsic value is the difference between the warrant's exercise price and the market price of the underlying. The premium is anything paid above the intrinsic value for the warrant. Typically the premium will decrease as the price of the warrant rises and the time to expiration decreases.

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warrant premium

The excess of a warrant's market price over its minimum value in exchange for shares of common stock. For example, a warrant to purchase 3 shares of stock at $10 each has a minimum value of $45 if the shares trade at a price of $25 (3 × [$25 - $10]). If the warrant has a market price of $55, the premium will be equal to $10 ($55 - $45). Although a warrant usually trades at a premium, the size of the premium declines as its price climbs and as it approaches expiration.