Our word of the day is “Warrant” Corporations may issue warrants that allow

you to buy a company's stock at a fixed price during a specific period of time, often 10

or 15 years, though sometimes there is no expiration date. Warrants are generally issued

as an incentive to investors to accept bonds or preferred stocks that will be paying a

lower rate of interest or dividends than would otherwise be paid. How attractive the warrants

are — and so how effective they are as an incentive to purchase — generally depends

on the growth potential of the issuing company. The brighter the outlook, the more attractive

the warrant becomes. When a warrant is issued, the exercise price

is above the current market price. For example, a warrant on a stock currently trading at

$15 a share might guarantee you the right to buy the stock at $30 a share within the

next 10 years. If the price goes above $30, you can exercise, or use, your warrant to

purchase the stock, and either hold it in your portfolio or resell at a profit. If the

price of the stock falls over the life of the warrant, however, the warrant becomes

worthless. Warrants are listed with a "wt" following the stock symbol and traded independently

of the underlying stock. For example, if you own warrants to purchase a stock at $30 a

share that is currently trading for $40 a share, your warrants would theoretically be

worth a minimum of $10 a share, or their intrinsic value.