asked 80.0k views
1 vote
T/F: A major difference between a call option and a warrant is that call options are issued by the company so that any proceeds from the sale of stock go to the issuing firm

asked
User Nadjah
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8.1k points

1 Answer

3 votes

Final answer:

The statement given is false as call options are not issued by the company, but rather by other investors, whereas warrants are indeed issued by the company and can provide it with capital upon exercise.

Step-by-step explanation:

The statement presented is false. While it's true that a company receives money when it sells its own stock, especially through an Initial Public Offering (IPO) and secondary offerings, call options are typically not issued by the company, but by other investors in the market. On the other hand, a warrant is indeed issued by the company, and when a warrant is exercised, the company issues new shares, which means the proceeds from this transaction go to the company. Therefore, while both call options and warrants give the right to purchase a company's stock at a certain price before a certain date, a major difference is that warrants are issued by the company, potentially providing the firm with capital, whereas call options are traded among investors and do not directly result in capital for the company.

answered
User Sarath Rachuri
by
7.9k points
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