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Series 3 Glossary of Terms questions and answers already solved 2024
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Series 3 Glossary of Terms questions and answers already solved 2024
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Series 3 Glossary of TermsActuals - correct answer ✔the physical, or cash, commodity. The goods
underling a futures contract
Arbitrage - correct answer ✔the purchase of a commodity against the
simultaneous sale of a commodity to profit from unequal prices. The two
transactions may take place on different exchanges, between two diff
commodities, in diff delivery months, or between cash and futures markets
(see spreading)
Basis - correct answer ✔the difference between the cash price and the
futures price of a commodity. CASH - FUTURES = BASIS. Basis also is used
to refer to the diff between prices a diff markets or between diff commodity
grades
Bear Spread - correct answer ✔sale of near-month futures contract against
the purchase of deferred-month futures contracts in expectation of a price
decline in the near month relative to the more distant month. EX: selling a Dec
contract and buying a more distant March Contract
Beta - correct answer ✔a measure correlating stock price movement to the
movement of an index. Beta is used to determine the number of contract
required to hedge with stock index futures or futures options
Broker - correct answer ✔an agent who executes trades (buy or sell orders)
for customers. He/She receives a commission for these services. Other terms
used to describe a broker include: a) account executive (AE), b) associated
person (AP), c) reisered commodity representative (RCR), or d) NFA
Associate
,Bull Spread - correct answer ✔the purchase of near-month futures contract
against the sale of deferred-month futures contract in expectation of a price
rise in the near-month relative to the deferred. One type of bull spread, the
limited risk spread, is placed only when the market is near full carrying
charges. See Limited Risk Spread
Call - correct answer ✔the period at market opening or closing during which
futures contract prices are established at auction
Call Option - correct answer ✔a contract giving the buyer the right to
purchase something within a specified period of time at a specified price. The
seller receives money (the premium) for the sale of this right. The contract
also obligates the seller to deliver, if the buyer exercises his right to purchase.
Carrying Charges - correct answer ✔the cost of storing a physical
commodity, consisting of interest, insurance, and storage fees. Carrying
charges usually are reflected in the diff between futures prices for diff delivery
months.
Cash Commodity - correct answer ✔a physical commodity, as distinguished
from a futures contract, which calls for the delivery of the "cash commodity"
during the delivery period.
Discretionary Accounts - correct answer ✔an arrangement in which an
account holder gives power of attorney to another person, usually his broker,
to make decisions to buy or to sell without notifying the owner o the account.
Discretionary accounts are often called "managed" or "controlled" accounts.
Eurodollar Time Deposits - correct answer ✔U.S. dollars on deposit outside
the U.S., either with a foreign bank or a subsidiary of a U.S. Bank. The
interest paid for these dollar deposits generally higher than that for funds
, deposited in U.S. banks because the foreign banks are risker - they will not be
supported or nationalized by the US gov upon default.
$1,000,000 face value
1 pt = .01 = $25.00
Even Up - correct answer ✔to close out, liquidate, or cover an open position
Federal Reserve Board - correct answer ✔a board of Directors comprised of
7 members which directs the federal banking system, is appointed by the
President of the US and confirmed by the Senate. The functions of this board
include formulating and executing monetary polity, overseeing the Federal
Reserve Banks, and regulating and supervising member banks. Monetary
policy is implemented through the purchase and sale of securities, and by
raising or lowering the discount rate - the interest rate at which banks borrow
from the federal reserve.
Financial futures - correct answer ✔include interest rate futures, currency
futures, and index futures. The financial futures market currently is the fastest
growing of all the futures markets.
Forward contract - correct answer ✔a contract entered into by 2 parties who
agree to the future purchase or sale of a specified commodity. This differs
from a futures contract in that the participants in a forward contract are
contracting directly with each other, rather than through a clearing corporation.
The terms of a forward contract are negotiated by the buyer and seller, while
exchanges set the terms of futures contracts.
Fundamental Analysis - correct answer ✔the study of specific factors, such
as weather, wars, discoveries, and changes in government policy, which
influence supply and demand and, consequently, prices in the marketplace.
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