Series 3 – The National Commodities Futures Test Series 3 – The National Commodities Futures Test Futures Trading Mechanics & Market Structure 2

Question 1

Which entity acts as the buyer to every seller and the seller to every buyer in futures markets?

Accepted Answer

Clearinghouse

Answer

Introducing broker

Answer

Commodity pool operator

Answer

NFA

Question 2

A futures trader who offsets a long position by selling an equal number of contracts in the same delivery month has:

Accepted Answer

Closed the position

Answer

Rolled the position forward

Answer

Created a spread

Answer

Exercised a delivery option

Question 3

What does the term 'contract month' refer to in futures trading?

Accepted Answer

The month in which delivery or final settlement occurs

Answer

The month the contract was first listed

Answer

The month margin requirements change

Answer

The month the trader opened the position

Question 4

Which price relationship shows whether a futures contract is trading above or below the spot price?

Accepted Answer

Basis

Answer

Spread

Answer

Premium

Answer

Contango differential

Question 5

A 'limit move' in a futures market occurs when:

Accepted Answer

The price reaches the maximum daily price change set by the exchange

Answer

A trader exceeds position limits

Answer

The clearinghouse stops accepting orders

Answer

The exchange halts trading for the day

Question 6

Which type of order becomes a market order only when the futures price reaches a specified level?

Accepted Answer

Stop order

Answer

Limit order

Answer

Market-if-touched (MIT) order

Answer

Day order