Calculate warrant intrinsic value from current stock price and strike price, or solve for stock or strike price when intrinsic value is known.

Warrant Intrinsic Value Calculator

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Warrant Value Formula

The following equation is used to calculate a warrant’s intrinsic value (the minimum value based only on the current stock price and strike price).

IV = \max(0, MP - K)
  • Where IV is the warrant’s intrinsic value ($ per warrant, assuming 1 warrant allows purchase of 1 share)
  • MP is the current market price of the underlying stock ($/share)
  • K is the strike (exercise) price ($/share)

To calculate intrinsic value, subtract the strike price from the current stock price and set the result to 0 if it is negative. A warrant’s market price is often higher than intrinsic value because it includes time value, which depends on factors such as time to expiration, volatility, interest rates, expected dividends, and (for many warrants) dilution and specific warrant terms.

What is a Warrant Value?

Definition:

A warrant value typically refers to the market price of a warrant—i.e., what investors are willing to pay for the right to buy a company’s stock at a specified strike price within a certain timeframe. That market price generally reflects both any intrinsic value (if the underlying stock’s price exceeds the strike price) and additional time value associated with the remaining life of the warrant and other pricing factors.

How to Calculate Warrant Value?

Example Problem:

The following example outlines the steps and information needed to calculate the warrant’s intrinsic value (and how it relates to market price).

First, determine the current market price of the underlying stock. In this example, the current market price is $40.00 per share.

Next, determine the strike price. The warrant’s strike price is $35.00 per share.

Next, if you want to compare intrinsic value to the market price, look up the warrant’s current trading price. Suppose the warrant is trading at $8.00 per warrant.

Finally, calculate the intrinsic value using the formula above:

IV = max(0, MP – K)

IV = max(0, ($40 – $35)) = $5 per warrant

If the warrant is trading at $8 per warrant, then its time value (the amount above intrinsic value) is $8 – $5 = $3 per warrant.

FAQ

What factors can affect the warrant value?

The price of a warrant is influenced by several factors, including the current market price of the underlying stock, the strike price, the time left until the warrant’s expiration, and the stock’s volatility. Changes in interest rates and dividend payouts can also impact the warrant’s value.

How does a higher strike price affect the warrant value?

If the strike price is higher, the warrant’s intrinsic value decreases unless the underlying stock’s market price greatly surpasses that strike price. This typically lowers the overall warrant value, all else being equal.

How do I determine the time value of a warrant?

The time value is often derived from pricing models such as Black-Scholes, which take into account the stock’s volatility, time until expiration, and prevailing interest rates. Market supply and demand will also influence the time value portion of the warrant.