A warrant is a security, issued by a company (such as a financial institution), giving the holder the right to buy or sell a specified amount of a share of stock at a certain price at some future date.
Likewise, an option is an instrument (derivative instrument) that gives the holder the right, without the obligation, to buy or sell shares (or virtually any type of tradable asset), against a premium (option price), at a specified price (exercise price) or or before a specified date (expiration date). Exchange-traded options (ETOs) are not issued by companies but are listed on exchanges (though their underlyings are shares of stocks issued by companies).
Warrants are similar in nature to exchange-traded options (on equity), i.e., exchange-traded equity options. However, in warrants, the transaction takes place directly between the purchaser and the issuer (the company issuing the warrant). In this sense, and as is the case with exchange-traded options, a warrant gives the holder the right, but not the obligation, to buy from, or sell to, the issuer the underlying shares at the exercise price at or before the expiration date.
As opposed to exchange-traded options, warrants are not standardized. The features of the former are determined by the exchanges where they are traded.
Typically, warrants last longer than exchange-traded options. Some warrant issues have infinite lives.
