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Lesson 6. Stock Derivatives > Options - Pg. 34

Stock Derivatives 34 The 30-Second Recap · A subscription right enables current shareholders to purchase additional shares of a company's future-issued stock at a discount from the market price at that time. · Warrants are a "coupon" with which the bearer can purchase additional shares of a company's stock at a set price. Warrants are issued by the stock's issuing company. · Calls represent an agreement between two parties whereby the bearer purchases from the seller the right to purchase stock at a later date from him or her at a predetermined price; in theory, below the market price of the stock at that time. · Puts represent an agreement between two parties whereby the bearer purchases from the seller the right to later sell stock to him or her at a predetermined price; in theory, above the market price of the stock at that time. · Stock index options represent a call or a put whose price is not based on an individual stock, but rather on the value of the entire market as based on a market indicator or index. · ADRs are international stocks held in trust or custodial pools by a domestic entity for the purpose of accessibility to domestic investors. The purchase of an ADR does not provide ownership of the actual underlying stock, but of the trust or custodial pool.