what is a warrant premium 
a warrant premium is the difference between the current traded price of a warrant and its minimum value a warrant s minimum value is the difference between its exercise price and the current traded price of its underlying stock alternatively a warrant premium is the percentage difference between the cost of purchasing shares by exercising a warrant and buying them in the open market at the current price rizwan tabassum getty imagesunderstanding a warrant premiumwarrants have both a price and a premium typically the premium will decrease as the price of the warrant rises coupled with the decrease in the time to expiration a warrant is in the money itm when the exercise price is less than the current share price the more in the money the warrant is the lower the warrant premium high volatility may also cause the warrant premium to be higher as with call options the premium can increase or decrease depending on supply and demand factors calculating the warrant premiumfor the simple definition the premium is the amount above the intrinsic or minimum value example of warrant premiumin this example if the warrant price is 10 the exercise price is 25 and the current share price is 30 then the warrant premium would be 10 30 25 5 for the second calculation the premium expressed as a percentage is the difference between buying warrant shares vs buying shares through the open market for example an investor holds a warrant with a price of 10 and an exercise price of 25 the current share price is 30 the warrant premium would be 10 25 30 30 100 16 7 warrants tend to trade at premiums because traders believe that the underlying stock can increase in price therefore the longer the time until expiration the longer the stock has to rise however as with options as expiration approaches the premium shrinks difference between options and warrantsa warrant is similar to a call option it gives the owner the right but not the obligation to buy an underlying security at a specific price quantity and at a future time warrants are unlike an option in that it is issued by a company whereas an option is an instrument of the stock exchange the security represented in a warrant usually share equity is delivered by the issuing company instead of by an investor holding the shares traders cannot write warrants companies will often include warrants as part of a new issue offering to entice investors into buying the new security while most listed options have a maximum expiration term of one to three years warrants may have expiries of up to 15 years or more 