Taking The Test
You are given 150 minutes – and the screen will give you a running countdown of your time left, with a pop-up that gives you a five-minute warning – to answer 125 questions. Some you can pound out, so others you have the luxury of taking three or four minutes on. But any question that takes you five minutes or more means you'll probably get two wrong:

  1. Any question that it took you that long to figure out, you probably got wrong anyway, and
  2. You just used up your time for another question toward the end of the exam.

At some point, you just have to take your best guess – or any guess – and move on. You have the capability of marking questions for "review" at the end of the exam (time allowing) if you're unsure of the answer.

No question will be related to any other on the exam. They are all stand-alone.

Although you will be asked 125, questions, five of them are beta tests for future exams and are not counted toward your total. You will have no way of knowing which questions are actually being graded, so assume they all are. Of the 120 questions that matter, 85 will fall under the catch-all of "market knowledge" and 35 will have to do with regulations. For scoring purposes, these are "Part 1" and "Part 2" respectively; you must score at least 70% on each part (60 of 85 and 25 of 35). For test-taking purposes, questions come up in random order; you might get two market questions, a regulations question, another market, another regulation, another three markets, and so on.

Because there is no split between Part 1 and Part 2, there is no break scheduled during the Series 3 exam. If you have to leave your seat for any reason, the clock keeps running.

The questions take two forms: multiple choice or true/false. The multi-choices are all A, B, C or D. The true/false questions are all A or B. There are none of those tricky formats like:

I. Corn
II. Gold
IV. Eurodollars

A) I only
B) I and II
C) II and III
D) IV only

So don't worry about trick questions, just about difficult ones.

And always be mindful of how much time you don't have.

Doing The Math
Most of the math questions are similarly straightforward. They have to deal with whether a trade made money or lost money, and how much. If you follow the cash flow – and we'll show you how in a moment – you should do fine.

An example of the kind of question frequently asked would be:

A trader buys 10 December futures contracts for 5,000 bushels of corn for $2.50/bushel. A month later he sells the contracts for $3.00/bushel. What is the result of this trade?

The key here is to remember that every time the trader buys she is spending money, and every time she sells she is making money. If you use the negative sign (-) for every purchase and the positive sign (+) for every sale, you won't go wrong. It doesn't matter in which order the purchase and sale occurred, so you won't have to be concerned with, "Is this a short position or a long position?"

Here is how you should handle a question like this:

  1. On your note board, write " – 10 x 5,000 x $2.50," then solve: "-$125,000"
  2. Below that, write " + 10 x 5,000 x $3.00," then solve: "+$150,000"
  3. Add your two lines to yield "+$25,000".
  4. Then click whichever answer reads "$25,000 gain".

Spreads work similarly, but let's walk through it for clarity's sake:

A trader buys 10 December futures contracts for 5,000 bushels of corn for $2.50/bushel and hedges the position by selling 10 March futures for $2.75. A month later he unwinds the position by selling the December corn for $3.00/bushel and buying March corn for $3.20/bushel. What is the result of the trade?

Proceed as follows:

  1. On your note board, write " – 10 x 5,000 x $2.50," then solve: "-$125,000"
  2. Below that, write " + 10 x 5,000 x $2.75," then solve: "+$137,500
  3. Below that, write " + 10 x 5,000 x $3.00," then solve: "+$150,000"
  4. Below that, write " – 10 x 5,000 x $3.20," then solve: " -$160,000"
  5. Add your four lines to yield "+$2,500".
  6. Then click whichever answer reads "$2,500 gain".

Note that the dates in the above example are entirely incidental and have no effect on the math. You might also think that a good shortcut would be to combine the number of contracts with the number of bushels, but resist the temptation. There could be a question in which the trader does not hedge the entire position.

Sometimes the test will include extraneous information about strategy or market expectations. There will also be differences in terms of commodity, contract size or timing. But the math is the same regardless.

Of course, the test sometimes throws in commission costs. These are always quoted "per contract". So count them once and only once for every contract in play. You should not make the mistake of assuming the commission is for the whole lot of contracts, nor should pay two commissions per contract because the investor first bought and later sold them.

The test preparers may be displaying a little bias in the frequency with which their examples make rather than lose money. Any time you see a loss, check your math one more time.

Regulatory Questions

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