The go-to guide for the Series 3, with practice, examples, strategies, and more
Wiley Series 3 Exam Review 2020 + 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
Table of Contents
About The Series 3 Exam xi
About This Book xv
About The Test Bank xvii
About The Securities Institute of America xix
Chapter 1 Futures and Forwards 1
The Spot Market 1
Forward Contracts 2
Futures 3
Trading Futures on the Floor of the Exchange 4
Clearinghouse 5
Clearing Member Margin Calculations 7
Basis Grade 8
Pretest 11
Chapter 2 Trading Commodity Futures 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
Pretest 29
Chapter 3 Futures Pricing 31
Contract Sizes and Pricing 31
U.S. Treasury Futures 35
Stock Index Futures 36
Index Future Settlement 37
Single Stock Futures 37
Foreign Currency Futures 39
Pretest 41
Chapter 4 Price Forecasting 45
Futures Market Pricing Structure 45
Agricultural Futures Pricing 48
Supply and Demand Elasticity 49
Government Agricultural Programs 49
Crop Year 50
Economic Policy 50
Tools of the Federal Reserve Board 51
Interest Rates 51
Reserve Requirement 52
Changing the Discount Rate 53
Federal Open Market Committee 53
Money Supply 53
Disintermediation 54
Moral Suasion 54
Fiscal Policy 55
International Monetary Considerations 56
London Interbank Offered Rate / LIBOR 57
Yield Curve Analysis 57
Technical Analysis 59
Pretest 65
Chapter 5 Speculation and Hedging 69
Speculation 69
Margin 72
Maintenance Margin 74
Changes to the Margin Requirement 78
Other Forms of Margin Deposits 79
Hedging 81
How to Manage an Imperfect Hedge 84
A Change in Basis Price 85
Hedging Financial Risks 88
Pretest 97
Chapter 6 Commodity Futures Options and Commodity Futures Spreads 101
Option Classification 101
Option Classes 102
Option Series 102
Bullish vs. Bearish 102
Possible Outcomes for an Option 103
Managing an Option Position 104
Buying Calls 104
Selling Calls 106
Buying Puts 108
Selling Puts 109
Option Premiums 111
Intrinsic Value and Time Value 113
Multiple Option Positions and Strategies 114
Long Straddles 114
Short Straddles 117
Spreads 120
Analyzing Spreads/Price Spreads 121
Bull Call Spreads/Debit Call Spreads 121
Spread Premiums Bull Call Spread 123
Bear Call Spreads/Credit Call Spreads 124
Spread Premiums Bear Call Spread 126
Bear Put Spreads/Debit Put Spreads 127
Spread Premiums Bear Put Spread 128
Bull Put Spreads/Credit Put Spreads 129
Spread Premiums Bull Put Spread 130
Synthetic Risk and Reward 131
Delta 133
Spreading Futures Contracts 133
Spreading Treasury Futures 136
The TED Spread 136
Pretest 139
Chapter 7 CFTC & NFA and Regulations 143
The Commodity Exchange Act of 1936 143
Futures Commission Merchant 145
Introducing Broker 146
Commodity Pool Operator 146
Commodity Trading Adviser 148
Risk Disclosure Documents 148
Additional Disclosures by CTAs and CPOs 154
Customer Accounts 155
Arbitration 160
The CFTC Reparation Process 161
Written Communication with the Public 166
Pretest 171
Answer Keys 175
Glossary of Exam Terms 183
Index 197
