"Here's an arrest warrant for you. You're under arrest".
You must have seen this in movies or shows.
But do you know there's something called *Stock Warrants* also?
'A stock warrant is an instrument which gives the right to an investor to purchase the stocks of the company at a predetermined price within a specified time frame'.
Didn't get it?
Let's look at an example.
HDFC Ltd. issued warrants in Aug 2020 at Rs.180 (Warrant Issue Price). The buyer got the right to convert each warrant for one share of HDFC at Rs.2,165 (Warrant Excercise Price) at any time in the next 3 years, i.e. till 10 Aug 2023.
The share price of HDFC Ltd. was around Rs.1,827 at that time.
This means, that anytime in the next 3 years if the share price of HDFC Ltd. goes well above Rs.2,345 (2165 + 180), the investor can convert his warrants into shares and reap the benefit.
Check the price of HDFC Ltd. stock today :-)