Applied Knowledge & Practice Flashcards
7 cards from real Series 3 – The National Commodities Futures Test practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Applied Knowledge & Practice flashcards as text
A corn farmer expects a price decline before harvest. Which futures position hedges this risk?
Answer: Short corn futures
A short futures position gains when prices fall, offsetting the lower value of the crop.
Cash corn is $4.95 and nearby futures are $5.10. What is the basis?
Answer: -$0.15
Basis equals cash minus futures, so 4.95 - 5.10 = -0.15.
A short hedger's basis moves from -$0.20 to -$0.10. What happened?
Answer: Basis strengthened, helping the hedger
A narrowing (strengthening) basis benefits a short hedger.
A bakery wants to lock in wheat costs against a price rise. What should it do?
Answer: Buy wheat futures
Users of a commodity hedge by buying futures to offset rising input costs.
A short hedger's cash price falls $0.50 while futures fall $0.45. What is the net result?
Answer: Loss of $0.05
The $0.45 futures gain offsets only part of the $0.50 cash loss, leaving a $0.05 loss from basis weakening.
An oil refiner locks in its processing margin. Which strategy matches a crack spread hedge?
Answer: Buy crude, sell gasoline and heating oil
A refiner buys crude futures and sells product futures to lock in the margin.
Under which condition is a hedge considered perfect?
Answer: Basis stays unchanged during the hedge
If basis is unchanged, gains and losses offset exactly.
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Sources & references
Exam facts on this page (fees, format, dates, passing scores) are checked against these official sources; the date is our last check. Editorial policy
- finra.org — Score release, test dates, test delivery, fees, exam format, passing score · verified Oct 2026
- nfa.futures.org — Eligibility, score validity · verified Oct 2026