Warrants are financial instruments that trade on the stock market just like stocks, but they work very differently. Before you invest in one, it's important to understand how they work and what risks they involve.
What's a warrant?
A warrant is an instrument that gives you the right to buy or sell an underlying stock at a set price, before an expiration date. On Bitso, you can only sell warrants, not exercise them. This means that if you don't sell your warrant before it expires, it'll lose all its value and you won't be able to recover your investment.
Can I exercise a warrant on Bitso?
No. On Bitso, warrants are only available for buying and selling on the secondary market. This means you can't exercise the right the warrant represents, that is, you can't use it to acquire or sell the underlying stock at the agreed price. Your only option to recover value from a warrant is to sell it on the market before its expiration date. If the warrant reaches its expiration date without being sold, it'll lose all its value and your invested capital won't be refunded.
How are warrants different from stocks?
Even though warrants appear on the market alongside stocks, they're different instruments
| Stock | Warrant | |
| Expiration | No expiration date | Has a deadline |
| Value at expiration | Retains value | Can reach $0 |
| Identification | Standard ticker | Ticker ends in "W" (e.g. CRESW, AUUDW) |
| Order types | Market and limit | Limit only when liquidity is low |
How do I identify a warrant in the app?
In Bitso, warrants are clearly labeled so you can spot them before you invest:
- They have a Warrant badge on the asset detail screen.
- Their ticker usually ends in "W."
- Before you confirm a purchase, you'll see a warning with the instrument's specific risks.
Warrant lifecycle
Warrants go through different states throughout their life:
- Active and tradeable
The warrant trades normally. You can buy and sell it using market orders or limit orders. - Illiquid
When there's low market activity, the warrant can become hard to sell. In this state, only limit orders are available since market orders aren't supported. - Expired or worthless (Worthless Removal)
When a warrant reaches its expiration date with no value, it's recorded as a corporate action called Worthless Removal. The asset is automatically removed from your portfolio and you'll receive a notification in the app.
Risks of investing in warrants
Warrants carry additional risks that don't apply to regular stocks:
- Total loss of capital. If the warrant expires worthless, you lose your invested amount. There are no refunds.
- Illiquidity. When liquidity is low, there may be no buyers available, making it difficult or impossible to sell before expiration.
- High volatility. A warrant's price can change drastically in a short time, more so than a typical stock.
- Fixed expiration date. Unlike a stock, you can't simply wait for the price to recover since the warrant has a hard deadline.
Make sure you understand these risks before investing. If you have questions, consult a financial advisor.