Risk Management & Mitigation 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 Risk Management & Mitigation flashcards as text
The primary purpose of futures margin is to:
Answer: Act as a good-faith performance bond
Margin is a performance bond ensuring the customer can meet contract obligations, not a loan down payment.
A customer's initial margin is $5,000 and maintenance margin is $4,000. Equity falls to $3,600. What deposit is needed to meet the margin call?
Answer: $1,400
A futures margin call generally requires restoring equity to the initial margin level: $5,000 - $3,600 = $1,400.
Compared with speculators, margin requirements for bona fide hedgers are typically:
Answer: Lower, often set at the maintenance level
Exchanges and FCMs commonly allow hedgers a reduced margin rate because the futures offset a cash position.
What does daily mark-to-market settlement do?
Answer: Credits gains and debits losses to accounts each day
Positions are revalued to the settlement price daily and variation is paid or collected.
If a customer fails to meet a margin call, the FCM generally may:
Answer: Liquidate positions to protect itself
Customer agreements typically allow the FCM to close out positions when margin calls go unmet.
Why is the margin on a calendar spread usually lower than on an outright futures position?
Answer: The two legs tend to offset each other, reducing net risk
Offsetting long and short legs in related contracts move together, so exposure is smaller.
Which statement about variation margin is correct?
Answer: It reflects daily price changes on open positions
Variation margin transfers daily gains and losses on open futures positions.
How this page was made: written with AI tools and published by Nathan Beja, founder of Practice Test Geeks, who is responsible for its content. Exam facts are checked against the official sources listed below. Not reviewed by a subject-matter expert. Editorial policy
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