FINRA Series 3 Course Notes

Know why futures markets exist, how standardized futures differ from forwards/securities, how clearing and delivery work, how term structure is described, and how hedgers differ from speculators.

• Calling normal markets 'rising' and inverted markets 'falling.'

• When you see 'customized bilateral,' think forward.

Master performance-bond margin, daily mark-to-market, option premium components, price-limit risk, offsets, delivery deadlines, EFPs, and option exercise/assignment.

• Using securities maintenance-margin percentages.

• Write LONG/SHORT before variation math.

Know order behavior and qualifiers, automated-order supervision, technical chart concepts, fundamental drivers and yield-curve/rate logic.

• Thinking a stop guarantees the stop price.

• Order questions = execution vs price control.

This is a major calculation area: identify future buy/sell exposure, pick long/short hedge, calculate basis, classify strengthening/weakening, and combine cash and futures results.

• Reversing cash − futures.

• Write C−F twice for basis-change questions.

Spread questions are about relative prices: classify the legs, track the quoted differential, understand carrying charges, and recognize legging risk and bull/bear calendar logic.

• Treating a spread as an outright price bet.

• Write both legs and the spread formula first.

Be fast and clean on directional P/L, transaction costs, return on margin equity, and protective order selection.

• Ignoring multiplier or contract count.

• Direction → price change → multiplier → contracts → fees.

Know buyer/writer risk, option hedge substitutes, expiration breakevens, synthetics, covered calls, four vertical spreads, and calendar/arbitrage concepts.

• Wrong breakeven formula.

• CALL + premium, PUT − premium for long breakeven.

Regulation is a separate passing part. Identify the actor, activity and governing duty: registration, ethics, account opening, discretion, reporting/limits, funds, communications, supervision, CPO/CTA rules, arbitration or discipline.

• Saying an IB may hold customer margin funds.

• Actor → activity → rule.