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Finra Series-6 Exam - Topic 2 Question 117 Discussion

A warrant differs from a standard call option in that:
B) when a warrant is exercised, the firm whose stock is being purchased will have an increase in cash; this is not the case when a standard call option is exercised.a warrant gives the holder the right to sell shares of the underlying stock; a call option gives the holder the right to buy shares of the underlying stock.when a call option is exercised, the outstanding shares of the firm whose stock is being purchased increases; this does not occur when a warrant is exercised.
A) a standard call option generally has a longer period to expiration than a warrant.

Finra Series-6 Exam - Topic 2 Question 117 Discussion

Actual exam question for Finra's Series-6 exam
Question #: 117
Topic #: 2
[All Series-6 Questions]

A warrant differs from a standard call option in that:

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Suggested Answer: B

A warrant differs from a standard call option in that when a warrant is exercised, the firm whose stock is being purchased will have an increase in cash; this is not the case when a standard call option is exercised. Both the warrant and the call option give the holder the right to purchase shares of a firm's stock, but the writer (seller) of a warrant is the firm itself whereas the writer of a standard call option is simply another investor. Upon exercising a warrant, the investor buys the stock from the firm itself, which increases the firm's cash account. When a call option is exercised, another investor's cash account is increased. For the same reason, when a call option is exercised, nothing happens to the outstanding shares of the firm; but when a warrant is exercised, the firm's outstanding shares will increase.


by Mignon at May 31, 2026, 09:08 PM

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Domonique
2 days ago
I lean towards B too. Cash flow matters!
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Stefanie
7 days ago
A is misleading. Warrants are different from options.
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Ona
12 days ago
I feel confused about the differences.
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Latia
17 days ago
Agreed, B makes sense. Call options don’t do that.
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Carrol
23 days ago
I think it's B. Warrants increase cash for the firm.
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Angelyn
28 days ago
Just to clarify, warrants are issued by the company, right?
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Ruthann
1 month ago
I disagree, call options can also affect share count when exercised.
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Juliann
1 month ago
Wait, are you saying exercising a warrant increases cash for the firm? That’s interesting!
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Vincent
1 month ago
Totally agree, warrants are more about raising cash for the company!
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Alpha
2 months ago
A warrant usually has a longer expiration than a call option.
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Earleen
2 months ago
I recall that a warrant gives the right to buy shares directly from the company, which is different from a call option. That might be important for this question.
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Casey
2 months ago
I’m a bit confused about the differences in share dilution between warrants and options. I thought both affected the number of shares outstanding, but maybe not in the same way?
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Merissa
2 months ago
I feel like we covered a question similar to this in class, and I think the key difference is that exercising a warrant increases the company's cash flow.
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Wendell
2 months ago
I think I remember that warrants usually have a longer expiration period than standard options, but I'm not entirely sure.
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