Definition of "Stock Warrants"

An option issued along with bonds or preferred stock that entitles the holder to buy a stated number of shares of the company's common stock at a specified price. The option price is usually set higher than the stock's market price at the time the fixed income security is issued. Warrants are generally used as sweeteners to enhance the marketability of the accompanying fixed income securities. Most warrants are detachable and can be traded on the major stock exchanges.