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Series 3 Practice Exam 2

Series 3 Practice Exams

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Series 3 Practice Exam 2

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Question 1 of 10

1. Question

To what degree does the Securities & Exchange Commission have jurisdiction in the commodities markets?

Securities are not commodities—no jurisdiction
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To the extent SEC-registered Broker/Dealers also do transaction in commodities future contracts, the SEC has jurisdiction over the conduct of those broker-dealers and their commodities-licensed sales personnel.
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The CFTC and the SEC work jointly to regulate the commodities exchanges.
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None of the above.
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Question 2 of 10

2. Question

Identify which of the following is considered an asset class?

Precious metals
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NYSE and NASDAQ listed securities
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Futures contracts on Oil and Gas
Correct Incorrect Correct answer

Commodities
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Question 3 of 10

3. Question

When a trader enters into a spread transaction, which of the statements below is untrue?

If it results in a debit, that represents the maximum potential loss.
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If it results in a credit, that will be the maximum potential gain.
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The objective of the spread strategy is to provide unlimited upside potential gain which minimizing downside potential loss.
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The objective of the spread strategy is to provide quantifiable gain and loss maximums.
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Question 4 of 10

4. Question

One of your clients takes the following commodity positions: purchased a Feb gold 3300 put at 6; sold a Feb gold 3310 put at 12. Gold contracts represent 100 Troy ounces. What is your client’s maximum potential gain and loss, disregarding commissions?

$600; $400
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$400; $600
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Unlimited; $400
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$600; Unlimited
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Question 5 of 10

5. Question

When an agricultural conglomerate has entered into a contract to deliver 30,000 bushels of wheat to a buyer, and the contract will require delivery in 90 days, in the event the conglomerate does not have the ability to deliver in a timely way, it most likely will:

Default on the contract.
Correct Incorrect Correct answer

Contact the buyer and re-negotiate the price.
Correct Incorrect Correct answer

Contact the buyer and re-negotiate the delivery date.
Correct Incorrect Correct answer

Buy the bushels of wheat in the spot market and make delivery.
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Question 6 of 10

6. Question

An introducing broker may directly deposit customer funds into the segregated account at the FCM:

With the approval of the CFTC
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With the approval of the FCM
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With the approval of the SEC
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No approval is necessary
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Question 7 of 10

7. Question

“The Commodity Futures Trading Commission has not passed upon the merits of participating in this trading program, nor has the Commission passed upon the adequacy or accuracy of this disclosure document.” This phrase in Bold Print is required to appear:

On all sales literature produced by registered commodity brokers.
Correct Incorrect Correct answer

On all advertising which refers to a specific commodity or commodities being offered by commodity brokers.
Correct Incorrect Correct answer

On the front cover of a disclosure document which sets forth how a commodity pool operator will invest the pool in a specific commodity or commodities.
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Only the Securities & Exchange Commission requires this so-called ‘disclaimer’ on the front cover of prospectuses for new stock offerings.
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Question 8 of 10

8. Question

With the global turmoil in the Middle East and elsewhere, the volatility and uncertainty of a steady supply of reasonably priced oil has rarely been greater. To best profit from an expectation that the price of oil will increase in the upcoming six months, a trader would likely:

Go long oil futures .
Correct Incorrect Correct answer

Take a short position in oil futures.
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Establish a spread position in oil with a bullish bias.
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Establish a spread position in oil with a neutral bias.
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Question 9 of 10

9. Question

One of the risks inherent in being on the buy side of a forward contract is:

The inability to have the funds available to make the purchase
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The opportunity cost risk of locking in a price which may turn out to be higher than would otherwise be required
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The performance risk that the seller may not be able to deliver the goods in a timely way
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The risk one assumes when not using an organized Exchange to protect the integrity of the transaction
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Question 10 of 10

10. Question

Which of the following statements is incorrect?

A put contract will breakeven at the strike price minus premium
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A call contract will breakeven at the strike price plus premium
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The breakeven point is the same for both the buyer and the seller of the option contract
Correct Incorrect Correct answer

None of these
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