WARRANT vs ETF?

[ubertrader123]

Guys, I was wondering what the difference btw a warrant and an ETF is?

Lets take an example:
i.e. lets look at an ETF that replicates GOLD, simple vanilla delta one...with the ETF you simply participate in the direction of the underlying.

On the other hand, you have a warrant, zero strike call, also giving you the same performance on the underlying: GOLD.

why would someone invest in an ETF or the warrant? what am I missing?

Tx for your input and guidance!

Rgds

 

[MTE]

The main difference in this case would be credit risk.

An ETF (a true fund not an ETN - exchange-traded note) doesn't have credit risk in case the fund manager goes bust as the assets of a fund are segregated.

A warrant is issued by some institution, usually a bank, and therefore carries credit risk of that bank. If the bank goes bust then your warrant is worthless.

 

[ubertrader123]

Quote from MTE:

The main difference in this case would be credit risk.

An ETF (a true fund not an ETN - exchange-traded note) doesn't have credit risk in case the fund manager goes bust as the assets of a fund are segregated.

A warrant is issued by some institution, usually a bank, and therefore carries credit risk of that bank. If the bank goes bust then your warrant is worthless.

nice, sometimes it's that easy...tx!

 

[moarla]

well in my view the credit risk is minimal. The main diff is TIME.
warrants work like options, ETFs like a stock with all the implications

 

[MTE]

Quote from moarla:

well in my view the credit risk is minimal. The main diff is TIME.
warrants work like options, ETFs like a stock with all the implications

Credit risk is minimal!? Think Lehman Brothers, Bear Stearns, AIG (although this one was saved),...

Time is not an issue if its a long-term warrant.