In finance a covered warrant (sometimes called naked warrant) is a type of warrant that has been issued without an accompanying bond or equity. Like a normal warrant, it allows the holder to buy or sell a specific amount of equities, currency, or other financial instruments from the issuer at a specified price at a predetermined date. Unlike normal warrants, they are usually issued by financial institutions instead of share-issuing companies and are listed as fully tradable securities on a number of stock exchanges. They can also have a variety of underlying instruments, not just equities, and may allow the holder to buy or sell the underlying asset. These attributes make it possible to use covered warrants as a tool to speculate on financial markets.

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