Series 3 (National Commodities Futures Exam) Free Trial
Thank you very much for your interests in our service Please note that our free trial questions merely demonstrate the system and layout. Our premium version adheres to the real exam format and is updated frequently on a weekly basis.
Quiz-summary
0 of 10 questions completed
Questions:
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
Information
FINRA Series 3 Free Trial
You have already completed the quiz before. Hence you can not start it again.
Quiz is loading…
You must sign in or sign up to start the quiz.
You have to finish following quiz, to start this quiz:
Results
0 of 10 questions answered correctly
Your time:
Time has elapsed
You have reached 0 of 0 points, (0)
Categories
- Not categorized 0%
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
- Answered
- Review
-
Question 1 of 10
1. Question
Which of the following statements is true regarding carrying charges?
Correct
Carrying charges
The three most commonly cited components of carrying charges are storage, insurance, and financing. The impact these components will have on a carrying charge will vary depending upon the type of commodity the contract is for. The overall cost of managing livestock or holding railcars of ethanol, for example, could involve significant storage and insurance costs, in addition to financing costs. In contrast, holding a financial instrument such as equity securities or government bonds may involve financing costs only. Commodities that are cash settled and are therefore never delivered (such as stock indices, currencies, and interest rates) would typically have few if any carrying charges. In a normal market, the difference between the spot or cash price and the price of a futures contract should be approximately equal to the cost of carry.Incorrect
Carrying charges
The three most commonly cited components of carrying charges are storage, insurance, and financing. The impact these components will have on a carrying charge will vary depending upon the type of commodity the contract is for. The overall cost of managing livestock or holding railcars of ethanol, for example, could involve significant storage and insurance costs, in addition to financing costs. In contrast, holding a financial instrument such as equity securities or government bonds may involve financing costs only. Commodities that are cash settled and are therefore never delivered (such as stock indices, currencies, and interest rates) would typically have few if any carrying charges. In a normal market, the difference between the spot or cash price and the price of a futures contract should be approximately equal to the cost of carry. -
Question 2 of 10
2. Question
Which of the following statements is false regarding spot price of commodities?
Correct
Spot price of commodities
Hedging tends to reduce the volatility of spot pricing by reducing demand in the cash market. The use of a hedge by a trader prevents panic buying in the case of unforeseen events. If, for example, catastrophic events caused the supply of a commodity to become drastically limited, the spot price would be expected to increase in an equally dramatic fashion. If the buyers and sellers of a commodity do not have a hedge in this type of situation, the buyer will suffer and the seller will benefit. However, if the market participants have hedged their positions, there will be no need for spot buying, and price swings are thereby moderated.Incorrect
Spot price of commodities
Hedging tends to reduce the volatility of spot pricing by reducing demand in the cash market. The use of a hedge by a trader prevents panic buying in the case of unforeseen events. If, for example, catastrophic events caused the supply of a commodity to become drastically limited, the spot price would be expected to increase in an equally dramatic fashion. If the buyers and sellers of a commodity do not have a hedge in this type of situation, the buyer will suffer and the seller will benefit. However, if the market participants have hedged their positions, there will be no need for spot buying, and price swings are thereby moderated. -
Question 3 of 10
3. Question
Regarding Requirements for AP trading in discretionary account of customer, which of the following statements is true?
Correct
Requirements for AP trading in discretionary account of customer
An AP is required to have been continuously registered with the NFA for a minimum of two years while concurrently operating in the capacity of an AP in order to trade in the discretionary account of a customer. The exception is if the AP is already registered as a CTA. The NFA has the discretion to waive the experience requirement based upon evidence of equivalent experience.Incorrect
Requirements for AP trading in discretionary account of customer
An AP is required to have been continuously registered with the NFA for a minimum of two years while concurrently operating in the capacity of an AP in order to trade in the discretionary account of a customer. The exception is if the AP is already registered as a CTA. The NFA has the discretion to waive the experience requirement based upon evidence of equivalent experience. -
Question 4 of 10
4. Question
Which of the following statements is true regarding bear call?
Correct
Bear call
A bear call is a vertical credit spread, and the trader seeks to benefit from a widening of the basis. That is, the trader seeks to profit from the net premium received, and does not want the price to rise (and the basis to narrow) such that the call is exercised.Incorrect
Bear call
A bear call is a vertical credit spread, and the trader seeks to benefit from a widening of the basis. That is, the trader seeks to profit from the net premium received, and does not want the price to rise (and the basis to narrow) such that the call is exercised. -
Question 5 of 10
5. Question
Which of the following statements is true regarding individuals who provide trading advice?
Correct
Individuals who provide trading advice
Generally speaking, an individual qualifies as a CTA if advice is provided either directly or indirectly. However, NFA registration rules provide a registration requirement exemption if the advice provided is not specifically tailored to the individual account of a customer. Examples would include publications such as books and periodicals, which present the same advice to all readers. Exemptions also exist for those whose advisory services are an incidental part of their trade or business.Incorrect
Individuals who provide trading advice
Generally speaking, an individual qualifies as a CTA if advice is provided either directly or indirectly. However, NFA registration rules provide a registration requirement exemption if the advice provided is not specifically tailored to the individual account of a customer. Examples would include publications such as books and periodicals, which present the same advice to all readers. Exemptions also exist for those whose advisory services are an incidental part of their trade or business. -
Question 6 of 10
6. Question
Regarding synthetic option, which of the following statements is true?
Correct
Synthetic option
A synthetic option is created by combining a futures position and an outright option position in a single order. The combined effect of each of the two legs provides a result that is equivalent to a single outright option.Incorrect
Synthetic option
A synthetic option is created by combining a futures position and an outright option position in a single order. The combined effect of each of the two legs provides a result that is equivalent to a single outright option. -
Question 7 of 10
7. Question
Which of the following statements is false regarding intradelivery and interdelivery?
Correct
Intradelivery and interdelivery
The “delivery” portion of the spread order names refers to the month in which the contract matures or expires. “Intra” means each leg matures during the same delivery month, while “inter” means that the legs mature during two different delivery months. Note that an interdelivery spread is synonymous with an intracommodity or calendar spread.Incorrect
Intradelivery and interdelivery
The “delivery” portion of the spread order names refers to the month in which the contract matures or expires. “Intra” means each leg matures during the same delivery month, while “inter” means that the legs mature during two different delivery months. Note that an interdelivery spread is synonymous with an intracommodity or calendar spread. -
Question 8 of 10
8. Question
Which of the following statements is true regarding costs for underlying commodities?
Correct
Costs for underlying commodities
Trading in futures transactions does not exempt one from paying commissions and other fees. Aside from the costs of opening and closing a position, there are other types of costs for various underlying commodities (such as agricultural commodities and interest rates) that will affect gross profit. Costs for underlying agricultural commodities can include substantial delivery, inspection, and storage costs, among others. Costs for financial instruments include lesser costs, such as bank transfers and record keeping, as well as interest in situations where borrowed assets are used.Incorrect
Costs for underlying commodities
Trading in futures transactions does not exempt one from paying commissions and other fees. Aside from the costs of opening and closing a position, there are other types of costs for various underlying commodities (such as agricultural commodities and interest rates) that will affect gross profit. Costs for underlying agricultural commodities can include substantial delivery, inspection, and storage costs, among others. Costs for financial instruments include lesser costs, such as bank transfers and record keeping, as well as interest in situations where borrowed assets are used. -
Question 9 of 10
9. Question
Which of the following statements is false regarding party to option contract with the greatest risk of loss?
Correct
Party to option contract with the greatest risk of loss
The seller or writer of an option bears the full obligation to meet the rights of the buyer (upon exercise), and thus has the greatest risk of loss. A seller or writer who engages in an option without an underlying position in the cash market is said to be “naked.” A subsequent exercise by the holder creates even greater risk for the seller, as the underlying commodity must be acquired in order to fulfill the contract.Incorrect
Party to option contract with the greatest risk of loss
The seller or writer of an option bears the full obligation to meet the rights of the buyer (upon exercise), and thus has the greatest risk of loss. A seller or writer who engages in an option without an underlying position in the cash market is said to be “naked.” A subsequent exercise by the holder creates even greater risk for the seller, as the underlying commodity must be acquired in order to fulfill the contract. -
Question 10 of 10
10. Question
From the statements below regarding option price, which one seems to be the most appropriate to you?
Correct
Option price
The intrinsic value of an option is the difference between the market price of the underlying commodity and the strike price if the option is exercised (the amount by which the option is in the money). Another factor influencing the price of an option is the time value, which is essentially the probability that an option will reach in the money status. For example, two options with the same strike price would be expected to be priced differently depending upon the length of time to expiration. As an option approaches its expiration date, the time value diminishes and approaches zero.Incorrect
Option price
The intrinsic value of an option is the difference between the market price of the underlying commodity and the strike price if the option is exercised (the amount by which the option is in the money). Another factor influencing the price of an option is the time value, which is essentially the probability that an option will reach in the money status. For example, two options with the same strike price would be expected to be priced differently depending upon the length of time to expiration. As an option approaches its expiration date, the time value diminishes and approaches zero.
Benefits Using Fraser Exam
- Save Your Valuable Time & Money To Retake The Exam
- Increase Your Market Competitiveness
- Frequently Updated Test Bank
- Adhere to Real Examination Format
- Unique Questions Bank by Fraser Exam
- Secured Payment via PayPal & SSL
- Instant Access Under One Minute
- Risk-Free Guarantee
- Premium Support 24/7/365
- Study Anywhere with Mobile Device
- Explanation Given For Each and Every Question
- Unlimited Access For Assigned Period