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
A trader is long a futures contract at 100 and buys a 98 put for 2 points. What is the maximum loss, ignoring commissions?
Answer: 4 points
Loss is limited to the 2 points between 100 and 98 plus the 2-point premium, or 4 points.
Which describes the risk of writing an uncovered (naked) call?
Answer: Theoretically unlimited loss as price rises
A naked call writer faces losses that grow without limit as the underlying rises.
A trader buys a 50 straddle, paying 2 for the call and 1.5 for the put. What are the breakeven prices at expiration?
Answer: 46.5 and 53.5
Total premium of 3.5 is subtracted from and added to the 50 strike, giving 46.5 and 53.5.
A trader holds 10 long calls on futures, each with a delta of 0.50. To be approximately delta neutral, the trader should:
Answer: Sell 5 futures
The calls behave like 5 long futures, so selling 5 futures offsets that exposure.
The maximum loss on a bull call spread is:
Answer: The net debit paid
A debit spread's risk is limited to the net premium paid to establish it.
Which risk is reduced by diversifying across uncorrelated commodity positions?
Answer: Concentration risk tied to a single market
Spreading exposure across uncorrelated markets lowers the impact of any one market's adverse move.
A covered call writer who is long futures sells a call and collects premium. Compared with the long futures alone, this strategy:
Answer: Provides limited downside cushion but caps upside
The premium offsets small losses, but gains above the strike are given up.
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