Series 3 — National Commodity Futures Exam Practice Test
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A full bank of original Series 3 — National Commodity Futures Exam practice questions across the official content areas, weighted like the real exam, with explanations. Free, no signup.
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About 120 questions, 150 minutes, and you need 70% to pass. Practice by topic here, then take the full timed mock exam to gauge readiness.
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PrepPass practice is in English, 中文 and Español. The official exam is in English — switch the question language to English any time to rehearse the exact terminology you'll see on test day.
Sample practice questions
A few real questions from this free bank, with full explanations. Use the practice tool above for the whole set.
- 1. Futures Fundamentals
In a standardized exchange-traded futures contract, which term is NOT set in advance by the exchange?
- a.The quantity of the commodity per contract
- b.The acceptable grade or quality of the commodity
- c.The price at which the trade is executed
- d.The delivery months available for trading
Answer: c
Explanation: The exchange standardizes quantity, grade, delivery months, and delivery terms so contracts are fungible. Price is the one term left to the open auction market, negotiated between buyer and seller each time a trade occurs.
- 2. Futures Fundamentals
Futures margin is best described as:
- a.A good-faith performance bond ensuring the customer can meet obligations
- b.A partial down payment toward the purchase price of the commodity
- c.A loan from the broker that accrues interest
- d.A non-refundable fee paid to the exchange
Answer: a
Explanation: Unlike securities margin, futures margin is a performance bond, not a loan or a down payment. It guarantees the trader can meet daily settlement obligations and is returned when the position is closed if no losses have consumed it.
- 3. Futures Fundamentals
A speculator who is long one futures contract will profit if:
- a.The futures price declines
- b.The futures price rises
- c.The basis weakens
- d.Volatility falls to zero
Answer: b
Explanation: A long position agrees to buy, so it gains when the futures price rises above the entry price and loses when it falls. A short position profits from a price decline.
- 4. Futures Fundamentals
Because futures margin is only a small fraction of a contract's notional value, futures positions are characterized by:
- a.High leverage, so small price moves cause large percentage gains or losses
- b.Low leverage, so returns closely track the underlying cash market
- c.No leverage, because the full contract value is deposited
- d.Negative leverage in falling markets only
Answer: a
Explanation: A small margin deposit controls a large contract value, producing high leverage. This magnifies both gains and losses as a percentage of the margin posted, which is central to the risk of futures trading.
- 5. Hedging, Basis & Spreads
Basis is defined as:
- a.The local cash (spot) price minus the futures price
- b.The futures price minus the strike price
- c.The initial margin minus the maintenance margin
- d.The difference between two option premiums
Answer: a
Explanation: Basis equals the cash price minus the futures price for a given location and delivery month. Hedging converts price risk into basis risk, and cash and futures prices converge as delivery nears.
- 6. Options on Futures
The buyer of a call option on a futures contract has the right to:
- a.Go long the underlying futures at the strike price
- b.Go short the underlying futures at the strike price
- c.Require the writer to deliver the physical commodity immediately
- d.Collect the premium from the writer
Answer: a
Explanation: A call gives its buyer the right to buy, meaning to establish a long futures position at the strike price. A put gives the right to go short. The premium flows from the buyer to the writer, not the reverse.
- 7. Options on Futures
A call option on futures with a strike price of 50 is trading while the underlying futures price is 56. The option is:
- a.Out of the money by 6
- b.At the money
- c.In the money by 6
- d.Worthless because it has no time value
Answer: c
Explanation: A call is in the money when the futures price is above the strike. Here 56 minus 50 gives 6 points of intrinsic value, so the call is in the money by 6. Any premium above 6 would be time value.
- 8. Fundamental & Technical Analysis
Which tool is characteristic of technical analysis rather than fundamental analysis?
- a.USDA crop production reports
- b.Interest-rate forecasts
- c.Industrial consumption data
- d.Support and resistance levels on a price chart
Answer: d
Explanation: Support and resistance levels are drawn from past price behavior and are hallmarks of technical analysis. Crop reports, rate forecasts, and consumption data are fundamental inputs that describe supply and demand.
- 9. Regulations (CEA, CFTC, NFA, AML)
The National Futures Association (NFA) is best described as:
- a.The industrywide self-regulatory organization for the U.S. derivatives industry
- b.A federal government agency created by Congress
- c.A clearinghouse that guarantees every futures trade
- d.A commodity exchange where contracts are listed
Answer: a
Explanation: The NFA is the self-regulatory organization (SRO) whose members include FCMs, IBs, CPOs, CTAs, and their associated persons. It is not a government agency, a clearinghouse, or an exchange.
- 10. Regulations (CEA, CFTC, NFA, AML)
Speculative position limits set by the CFTC and exchanges are designed primarily to:
- a.Guarantee profits for bona fide hedgers
- b.Prevent excessive speculation and market manipulation
- c.Force all speculators to take physical delivery
- d.Eliminate basis risk for hedgers
Answer: b
Explanation: Position limits cap the number of contracts a speculator may hold to curb excessive speculation and manipulation. Bona fide hedgers can apply for exemptions from these limits because they are offsetting real commercial risk.