Exercise Price

In trading, the term exercise price denotes the price at which a warrant or option entitles an investor to buy or sell its underlying asset.

The exercise price granted by a warrant or option plays a decisive role in determining its value.

Example: You have a warrant which entitles you to buy 10,000 shares in a new corporation’s stock at an exercise price of 200 Swiss francs per share. At the moment, the stock is selling for just 180 francs per share, so you warrant has little current value. However, if the company’s stock were to climb to 240 francs per share in the future, your warrant would deliver a discount of 40 francs per share or 400,000 francs total.

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Daniel Dreier is editor and personal finance expert at moneyland.ch.

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