Series 3 – The National Commodities Futures Test Series 3 – The National Commodities Futures Test Futures Trading Mechanics & Market Structure

Question 1

What is the minimum price fluctuation of a futures contract called?

Accepted Answer

Tick

Answer

A tick is the smallest allowable price movement for a given futures contract as defined by the exchange.

Question 2

Which type of futures order instructs the broker to execute a trade at the best available price immediately?

Accepted Answer

Market order

Answer

A market order directs the broker to buy or sell at whatever price is currently available in the market.

Question 3

Initial margin in a futures account is best described as:

Accepted Answer

A good-faith deposit required to open a position

Answer

Initial margin is a performance bond deposit required by the exchange to initiate a futures position.

Question 4

When a futures position is marked to market and the account falls below the maintenance margin level, the trader receives a:

Accepted Answer

Margin call

Answer

A margin call requires the trader to deposit additional funds to restore the account to at least the initial margin level.

Question 5

An open interest figure of 50,000 in a futures market means:

Accepted Answer

There are 50,000 outstanding long and short contracts combined

Answer

Open interest counts the total number of outstanding contracts that have not been settled or offset.

Series 3 – The National Commodities Futures Test Practice Test