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

Basis point

Answer

Pip

Answer

Spread

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

Limit order

Answer

Stop order

Answer

MIT order

Question 3

Initial margin in a futures account is best described as:

Accepted Answer

A good-faith deposit required to open a position

Answer

A loan from the broker to the customer

Answer

The full contract value paid upfront

Answer

Interest charged on open positions

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

Stop-out notice

Answer

Variation credit

Answer

Position limit warning

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

50,000 contracts were traded that day

Answer

50,000 contracts were settled in cash

Answer

50,000 traders hold positions

Question 6

Which futures market participant primarily enters the market to profit from price movements without intending to take delivery?

Accepted Answer

Speculator

Answer

Hedger

Answer

Arbitrageur

Answer

Commercial producer