Skip to main content

Wiley Series 3 Exam Review 2015 + Test Bank: The National Commodity Futures Examination

Wiley Series 3 Exam Review 2015 + Test Bank: The National Commodity Futures Examination

The Securities Institute of America, Inc.

ISBN: 978-1-118-93997-0

Oct 2014

204 pages

Select type: Paperback

$149.95

Product not available for purchase

Description

The go-to guide for the Series 3, with practice, examples, strategies, and more

Wiley Series 3 Exam Review 2015 + Test Bank is a comprehensive study guide for the FINRA Series 3 exam, which qualifies candidates to sell commodities or futures contracts. Created by the experts at The Securities Institute of America, Inc., this useful guide provides the information and practice you need to ace the exam. The book is designed to help you build and fine-tune your knowledge of each subject area covered, giving you the confidence you need to perform at your best. Work through review questions, study examples, and develop a strategy for the exam itself. You'll even find guidance toward effective studying methods that allow you to enter the exam fully mentally prepared.

The National Commodities Futures Examination (Series 3) tests your knowledge of rules and statutes applicable to the markets. This intense two and a half hour test is a must for aspiring financial professionals, as passing means registration to conduct business in commodity futures and options. This book provides a valuable opportunity to test your knowledge and bring weak areas up to par, with complete coverage of exam topics.

  • Review practice questions taken from each subject area covered by the exam
  • Study hundreds of examples to clarify complex concepts and techniques
  • Gain insight into the best strategies and tips for taking the Series 3
  • Develop an effective study plan to stay focused and keep stress to a minimum

Although the exam is entry-level, the stakes are high and the subject matter is complex. Don't muddle through it alone and assume you're prepared – this guide helps you be sure. For the Series 3 candidate serious about success, Wiley Series 3 Exam Review 2015 is your ticket to passing with flying colors – the first time.

ABOUT THE SERIES 3 EXAM xiii

ABOUT THIS BOOK xvii

ABOUT THE TEST BANK xix

ABOUT THE SECURITIES INSTITUTE OF AMERICA xxi

CHAPTER 1 FUTURES AND FORWARDS 1

Introduction 1

The Spot Market 1

Forward Contracts 2

Futures 3

The Role of the Futures Exchange 3

Trading Futures on the Floor of the Exchange 4

Clearinghouse 5

Clearing Member Margin Calculations 7

Basis Grade 8

Cornering the Market 8

Delivery 8

Speculators and Hedgers 9

Pretest 11

CHAPTER 2 TRADING COMMODITY FUTURES 15

Introduction 15

Types of Orders 15

Market Orders 16

Buy Limit Orders 16

Sell Limit Orders 16

Stop Orders/Stop Loss Orders 17

Buy Stop Orders 18

Sell Stop Orders 18

Stop Limit Orders 19

Other Types of Orders 19

Commissions 26

Delivery Months 27

Pretest 29

CHAPTER 3 FUTURES PRICING 31

Introduction 31

Contract Sizes and Pricing 31

U.S. Treasury Futures 35

Stock Index Futures 36

Index Future Settlement 37

Foreign Currency Futures 37

Pretest 41

CHAPTER 4 PRICE FORECASTING 43

Introduction 43

Futures Market Pricing Structure 43

Agricultural Futures Pricing 46

Crop Year 46

Technical Analysis 47

Open Interest 50

Pretest 53

CHAPTER 5 SPECULATION AND HEDGING 57

Introduction 57

Speculation 57

Margin 60

Maintenance Margin 62

Open Trade Equity 63

Changes to the Margin Requirement 66

Hedging 67

Case Study: Long Hedger 68

Case Study: Short Hedger 69

How to Manage an Imperfect Hedge 71

A Change in Basis Price 72

Hedging Financial Risks 75

Using Index Futures as a Hedge 75

Beta Hedge 76

Currency Hedge 77

Interest Rate Hedge 79

Pretest 83

CHAPTER 6 COMMODITY FUTURES OPTIONS AND COMMODITY FUTURES SPREADS 87

Introduction 87

Option Classification 87

Call Options 87

Put Options 88

Option Classes 88

Option Series 88

Bullish vs. Bearish 88

Bullish 88

Bearish 89

Possible Outcomes for an Option 89

Exercised 89

Sold 90

Expire 90

Exercise Price 90

Managing an Option Position 90

Buying Calls 90

Maximum Gain Long Calls 91

Maximum Loss Long Calls 91

Determining the Breakeven for Long Calls 91

Selling Calls 92

Maximum Gain Short Calls 92

Maximum Loss Short Calls 93

Determining the Breakeven for Short Calls 93

Buying Puts 94

Maximum Gain Long Puts 94

Maximum Loss Long Puts 94

Determining the Breakeven for Long Puts 95

Selling Puts 95

Maximum Gain Short Puts 96

Maximum Loss Short Puts 96

Determining the Breakeven for Short Puts 96

Option Premiums 97

In the Money Options 98

At the Money Options 98

Out of the Money Options 98

Intrinsic Value and Time Value 99

Premiums for Options on Treasury Bond Futures 99

Premiums for Options on Treasury Bill Futures 100

Multiple Option Positions and Strategies 100

Long Straddles 100

Maximum Gain Long Straddle 101

Maximum Loss Long Straddle 101

Determining the Breakeven for Long Straddle 102

Short Straddles 103

Maximum Gain Short Straddle 104

Maximum Loss Short Straddle 104

Determining the Breakeven for Short Straddle 104

Spreads 106

Price Spread/Vertical Spread 106

Calendar Spread/Time Spread 106

Diagonal Spread 107

Analyzing Spreads/Price Spreads 107

Bull Call Spreads/Debit Call Spreads 107

Maximum Gain Bull Call Spread 108

Maximum Loss Bull Call Spread 109

Determining the Breakeven for a Bull Call Spread 109

Spread Premiums Bull Call Spread 109

Bear Call Spreads/Credit Call Spreads 110

Maximum Gain Bear Call Spread/Credit Call Spread 110

Maximum Loss Bear Call Spread 111

Determining the Breakeven for a Bear Call Spread 111

Spread Premiums Bear Call Spread 112

Bear Put Spreads/Debit Put Spreads 113

Maximum Gain Bear Put Spread/Debit Put Spread 113

Maximum Loss Bear Put Spread 113

Determining the Breakeven for a Bear Put Spread 114

Spread Premiums Bear Put Spread 114

Bull Put Spreads/Credit Put Spreads 115

Maximum Gain Bull Put Spread 115

Maximum Loss Bull Put Spread 115

Determining the Breakeven for Bull Put Spread 116

Spread Premiums Bull Put Spread 116

Synthetic Risk and Reward 117

Long Futures Short Calls/Covered Calls 118

Long Futures Long Puts/Married Puts 118

Short Futures Long Calls 118

Short Futures Short Puts 118

Delta 119

Spreading Futures Contracts 119

Pretest 123

CHAPTER 7 CFTC & NFA AND REGULATIONS 127

Introduction 127

The Commodity Exchange Act of 1936 127

The National Futures Association 128

Futures Commission Merchant 129

Introducing Broker 130

Commodity Pool Operator 130

Commodity Trading Advisor 132

Risk Disclosure Documents 132

Customer Accounts 138

Individual Account 139

Joint Account 139

Joint Tenants with Rights of Survivorship 140

Joint Tenants in Common 140

Transfer on Death 140

Death of a Customer 141

Partnership Accounts 141

Corporate Accounts 141

Discretionary Trading Authorization 141

Managing Discretionary Accounts 142

Arbitration 142

The Arbitration Process 143

The CFTC Reparation Process 144

Awards Under Arbitration 144

Currency Transactions 144

The Patriot Act 144

U.S. Accounts 145

Foreign Accounts 145

Annual Compliance Questionnaire 146

Ethics Training 146

Violations and Complaints 146

Position Reporting and Speculative Position Limits 147

Written Communication with the Public 148

Customer Confirmations 148

Customer Account Statements 149

Record Keeping 149

Business Continuity Plan 150

Pretest 151

ANSWER KEYS 155

Chapter 1: Futures and Forwards 155

Chapter 2: Trading Commodity Futures 156

Chapter 3: Futures Pricing 157

Chapter 4: Price Forecasting 157

Chapter 5: Speculation and Hedging 158

Chapter 6: Commodity Futures Options & Commodity Futures Spreads 159

Chapter 7: CFTC & NFA and Regulations 160

GLOSSARY OF EXAM TERMS 163

INDEX 177