I'll take a stab at answering this also. Might help others as well. Except I'm gonna change "when" to "if" because there's still no guarantee the warrants get there. Question was:
"As for the SD warrants if they hit strike price and SD keeps moving higher, will the warrants gain $1 for every dollar SD moves over the strike price?"
The answer is they would probably move slightly less than dollar for dollar until the time value is eliminated.
The time value for all warrants (or options for that matter) erodes in two ways: either as the expiration date approaches, or as the warrants move deep into the money. (Or both.) The expiration date makes total sense to most of us, but the moving deep into the money is not as intuitive to understand. The reason the time value goes away here is because you have to put up a much larger amount for just the intrinsic value of the warrant.
The price you pay for a warrant (or an option) is made up of two parts: the intrinsic value and the time value. The intrinsic value refers to how far in-the-money the warrant is. So if your warrant is out of the money, you're paying solely for time value, there is no intrinsic value. If your warrant has a strike price of $20 and the price of the stock is currently $21, the warrant has an intrinsic value of $1. Barring some trading glitch or serious illiquidity, a warrant will always trade for at least its intrinsic value. But someone may also be willing to pay some time value for the remaining time before expiration, so the warrant itself may trade at a price of, say, $2.20. But if the stock price now goes to $22, the warrant price might go to $3.10 rather than $3.20 (so it went up by $.90 rather than $1 that the stock increased). The time value continues to get eliminated the further in-the-money you go, and the price you pay is mainly intrinsic value. Let's say you had a longer-dated warrant, and rather than just being a few dollars in the money, let's say your strike price is still $20, but the stock price over time has now moved up to $60. The warrant would almost never trade for much over $40. Why? Because that's a lot of money to put up and you could be doing other things with that money. You're nearly paying the entire stock price at that point. So it sort of switches from factoring in the time value of a warrant, to factoring in the time value of your own money that you have to put up.
While it might seem odd to buy deep-in-the-money warrants because they're expensive, they can actually make sense because you essentially get some free leverage. No borrowing costs, and no chance of a margin call. If you're interested in buying a stock, it always makes sense to look to see if there are any deep in the money warrants, because they often have very little time value priced into them and thus you're getting free leverage.
As an example, one I currently own is the warrant on Occidental Petroleum. Nothing special about OXY stock in particular that I like, just exposure to a bull market in energy. The warrant expires in Aug 2027 and has a strike price of $22. The stock is currently around $69, but the warrant trades at around $47 (give or take a few pennies). Add $22 to $47 and you get $69. So that's 5 years of free leverage and the warrants are incredibly liquid and have almost no bid/ask spread. Plus, no worrying about an expiration date in just a few months. As an added bonus, if the stock price collapsed horribly and started to come down near the $22 strike price, some time value would start to be priced back into the warrants. So they give dollar for dollar to the upside, and slightly less than dollar for dollar to the downside in a huge collapse. Every little advantage helps.
So anyway, hope that explanation helps rather than confuses (and assuming I didn't make any typos).
