series 3

Question 1

globex

Answer 1

cme / electronic platform / side by side / open outcry

Question 2

fut on ICE

Answer 2

based in london, but can be exchanged with NY

Question 3

risk disclosure doc

Answer 3

must be signed BEFORE account opened

Question 4

OPTION disclosure doc

Answer 4

must show components of option premium [time value and intrinsic]. but NOT the actual premium

Question 5

opening acct

Answer 5

if customer does not disclose certain info, can still open acct

Question 6

cash acct

Answer 6

not allowed for commodities

Question 7

margin agmt

Answer 7

MUST be signed by all clients

Question 8

FCM capital requirement

Answer 8

$1,000,000

Question 9

IB capital requirement

Answer 9

$45,000

Question 10

books + records

Answer 10

5 yrs

Question 11

Position limits

Answer 11

speculators only

Question 12

churning

Answer 12

excess trading to generate commissions

Question 13

block orders

Answer 13

allocation must be done before end of day; not required to be specified at time of order

Question 14

disclosure document

Answer 14

can be used 12 months from effective date

Question 15

AP can work with how many FCMs?

Answer 15

2, if approval received

Question 16

breakout of support

Answer 16

bearish

Question 17

breakout of resistance

Answer 17

bullish

Question 18

h&s top

Answer 18

reversal - bearish

Question 19

inverted h&s (bottom)

Answer 19

bullish

Question 20

convergence of spot and fut

Answer 20

must happen by first day delivery

Question 21

costs of carry

Answer 21

storage, financing, insurance. NOT transport

Question 22

1% of 100,000
1/32 of $1000

Answer 22

$1,999
$31.25

Question 23

optns on tnotes and tbonds

Answer 23

1/64

Question 24

t bills / eurodollar

Answer 24

quoted in bps, 1 bp - $25

Question 25

who establishes margin?

Answer 25

exchange

Question 26

is margin diff for long and short pos?

Answer 26

no

Question 27

hedging vs speculating margin

Answer 27

smaller for hedging.

Question 28

margin requirements

Answer 28

calculated daily / based on settlement vlaue

Question 29

equity < maintenance margin

Answer 29

restore to initial margin

Question 30

pyramiding

Answer 30

use excess equity on other positions to meet margin req on new positions

Question 31

spread

Answer 31

sell one fut contract and buy another

Question 32

type of spread

Answer 32

intramarket/interdelivery - same exch, diff mo intermarket - diff exch but same commod and mo intercommodity - 2 diff commod

Question 33

spreaders sentiment

Answer 33

look @ near month. meaning if bullish, go long near month EXCEPTION is stock index futures / fx spreads

Question 34

spreads - widen / narrow

Answer 34

long expensive - WIDEN short expensive - NARROW

Question 35

NOB spread

Answer 35

create offsetting positions in 3 year t bond fut and 10 year t note fut. if long term rates are falling faster than intermediate term rates, do NOB spread by shorting t note futures and long t bond fut

Question 36

basis

Answer 36

Producers, long commodity, short fut, long basis = STRENGTHEN = more pos Consumers, short commodity, long fut, short basis = WEAKEN = more neg

Question 37

effective selling price

Answer 37

cash now + profit on hedge OR cash now - loss on hedge

Question 38

effective selling price or cost

Answer 38

effective selling price = producer. effective cost = consumer

Question 39

index fut

Answer 39

hedge positions against systematic risk. settled for cash multiplier: sp500 = 250, emini 50 can offset sp500 contract with equivalent amt of emini

Question 40

synthetic long call

Answer 40

long call = long put+ long fut

Question 41

conversion

Answer 41

combine all from synthetic long call -> long call = long f

Question 41

conversion

Answer 41

start from synthetic long call MOVE EVERYTHING TO THE RIGHT-> long call = long put + long fut subtract long call, = long put + long fut - short call

Question 42

reversal

Answer 42

start with synthetic long call+ MOVE EVERYTHING TO THE LEFT-> long call = long put + long fut long call - short put - short fut

Question 43

european vs american option

Answer 43

european can be exercised ONLY business day before ex american can be exercised any time

Question 44

order // time stamp

Answer 44

within 1 min of receipt by FCM

Question 45

ITM, options

Answer 45

call, when market > strike put, when market < strike

Question 46

premium

Answer 46

intrinsic value + time value

Question 47

what influences time value

Answer 47

time til expiration and vol of underlying

Question 48

long straddle

Answer 48

vol trade. buy both call and put

Question 49

short straddle

Answer 49

S for stability. sell call and put

Question 50

do banks have to join NFA?

Answer 50

no

Question 51

performance history

Answer 51

just need 5 years, or life of pool if > 3 yrs. SO 4 years need all pools

Question 52

switch order

Answer 52

offset existing position and roll into later month

Question 53

delta

Answer 53

delta increase for calls when market rises ITM optiosn have delta close to 1. OTM close to 0 As market rises, calls become deeper in the money and rise to 1

Question 54

backwardated mkt

Answer 54

backwardated caused by tight supply/shortage

Question 55

eurodollar settlement

Answer 55

cash

Question 56

vertical spread

Answer 56

same optn, same exp , diff strike buy call / sell call

Question 57

horizontal spread

Answer 57

diff exp

Question 58

cpo account statements

Answer 58

at least qtly NAV > 500K, monthly

Question 59

maintenance margin

Answer 59

if equity < maintenance margin, margin call