NFA Series 3 - National Commodity Futures Examination · USA · National Futures Association (administered by FINRA)
Original practice questions written to the published syllabus · not past papersNFA Series 3 - National Commodity Futures Examination is a licensing and registration exam run by National Futures Association (administered by FINRA), for candidates in USA. Two parts, 120 scored MCQs, 2 h 30 min, USD 140; 70% needed on each part.
Source: finra.org.
Checked against the exam body's published information. Formats and fees change; confirm the current edition there before you book.
Hedging and basis arithmetic, margin calls, option payoffs, spreads, speculative strategies, and US regulation by the CFTC and NFA.
How commodity exchanges let farmers, processors and traders manage price risk, how contracts, margins and settlement work, and how the market is regulated.
Our 18 NFA Series 3 questions in this subject: 2 easy, 13 medium, 3 hard, across 9 units.
Choose an answer, then open the working. Each explanation says why the right answer is right and why the others are not.
These 10 were written to NFA Series 3 and are not shown on any other exam's page.
A grain futures contract covers 5,000 bushels and is quoted in cents per bushel with a minimum tick of 1/4 cent. What is the value of one tick per contract?
A. US$ 12.50
Tick value = tick size × lot size = 0.0025 dollars × 5,000 bushels = US$ 12.50. The common slip is to treat 1/4 cent as 0.25 dollars, giving US$ 1,250, or to misplace the decimal once, giving US$ 125 or US$ 1.25.
Why do exchanges usually set tighter position limits for the spot (expiring) month than for deferred months?
A. Because the risk of a squeeze or corner is greatest when the contract is near delivery
Near expiry, a large long position relative to deliverable supply can force shorts to buy back at artificial prices. Tighter spot-month limits reduce that risk. Volume in the spot month is not zero, margins are collected (and often raised), and hedgers may trade it.
A put option with strike 2,300 when the futures price is 2,450 is:
A. Out of the money
A put is in the money when the underlying is below the strike. Here the futures price is above the strike, so exercising the right to sell at 2,300 would be worthless: the put is out of the money.
A farmer expects to harvest maize in October. Futures contracts trade for September, December and March. Which month should she normally use for a short hedge?
A. December
The usual rule is to choose the first contract month that expires after the planned cash sale, so the position can be closed before its delivery period. September expires before the harvest sale; March adds more basis uncertainty and less liquidity for the same purpose.
Which hedger benefits from a weakening basis?
B. A long hedger (buyer of futures)
A long hedger's effective cost is the initial futures price plus the closing basis; a weaker (more negative) closing basis lowers that cost. Short hedgers gain when the basis strengthens.
A farmer sells December futures at 2,450. Her historical basis at harvest for her location is -90. What price should she expect to receive for her crop if the basis behaves as usual?
A. 2,360
Expected price = futures price + expected basis = 2,450 + (-90) = 2,360. Subtracting a negative basis gives 2,540; ignoring basis gives 2,450.
Why can a bona fide hedger typically obtain an exemption from speculative position limits?
A. Because the hedger's futures position offsets an equivalent cash-market exposure rather than adding new price risk
Position limits aim at speculative concentration. A hedger's futures position reduces total risk, so regulators allow exemptions on proof of the underlying exposure. Hedgers still pay margins and are still subject to surveillance.
A trader expects the market to tighten. He buys March wheat and sells May wheat when May is 120 above March. Later May is only 60 above March. With a lot of 100 units of price quantity, what is his profit per spread?
D. 6,000
His position gains when the near month rises relative to the deferred, i.e. when the May-over-March spread narrows. The spread narrowed by 60, so profit = 60 × 100 = 6,000. −6,000 is the sign error; 12,000 and 18,000 use a spread level instead of the change.
The break-even futures price at expiry for a bought call with strike 5,000 and premium 150 is:
C. 5,150
A call buyer breaks even when the payoff equals the premium: F = K + premium = 5,150. 4,850 is the break-even of a put with the same numbers.
In US grain futures, delivery against CBOT contracts is typically made by transfer of:
D. Shipping certificates or warehouse receipts issued by exchange-approved firms
Delivery instruments are shipping certificates or warehouse receipts from approved ('regular') firms. The grain stays in the delivery system; nothing is delivered to the exchange building.
This plan follows where our questions actually fall, so the time goes where the marks are likely to be. It is our reading of the syllabus, not the exam body's weighting.
Read the manual chapters for these first and do every worked question you can find on them.
Aim for one sitting per unit, then mixed questions across them.
Learn the definitions, classifications and standard numbers; these units are more often recalled than worked.
Come back to these after a first pass, untimed, and read every explanation, including for the options you rejected.
Do these early in revision so they are fast on the day.
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