Warrants give the holder the right (but not the obligation) to purchase stock at a specified price within a specific period of time. They are often used by banks, providers of venture debt and venture capitalists to mitigate their risk and maximize their upside. There are three components of a warrant: the number of shares, the strike price and the expiry date. The terms of a warrant are negotiated based on the risk/return profile of the deal—most warrants translate to 1-2% of the company when executed, but some warrants have been converted to 20%+.