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Certified Commodity Trader (CCT) Practice
Exam , covering commodity markets, futures
and options, hedging, speculation, fundamental
and technical analysis, spreads, arbitrage, risk
management, clearing, margins, delivery, and
regulatory framework (CFTC/NFA).
Each question is immediately followed by the correct answer and a concise explanation referencing standard industry knowledge and CME/NFA/CFTC rules.
Certified Commodity Trader (CCT) Practice Exam – 250 MCQs
(Unbridged)
SECTION 1: COMMODITY MARKETS & EXCHANGES (Q1–30)
Q1. Which US futures exchange is the largest (by volume) and offers a wide range of products including agricultural, energy, metals, and financials?
A) Chicago Mercantile Exchange (CME) Group B) New York Mercantile Exchange (NYMEX) C) Intercontinental Exchange (ICE) D) London Metal Exchange (LME) Correct Answer: A Explanation: CME Group (formed by merger of CME, CBOT, NYMEX, KCBT) is the world’s largest derivatives exchange. Q2. The “spot” (cash) market refers to: A) Immediate delivery and payment of the physical commodity B) Futures contracts for future delivery C) Options contracts D) Swap agreements Correct Answer: A Explanation: Spot market involves immediate (or very near term) physical delivery. Q3. A “futures contract” is:
Q5. “Initial margin” is set by: A) The exchange (or broker, with exchange minimum) B) The trader C) The CFTC D) The clearinghouse only Correct Answer: A Explanation: Exchanges set minimum initial margin requirements; brokers may require higher margin. Q6. “Maintenance margin” is: A) The minimum equity that must be maintained in a futures account; if equity falls below, a margin call is issued B) The initial deposit C) The profit on a trade D) The commission paid Correct Answer: A Explanation: Margin calls require additional funds to restore to initial margin level.
Q7. A “margin call” occurs when: A) Account equity falls below maintenance margin B) A trade is profitable C) The contract expires D) The trader closes a position Correct Answer: A Explanation: Margin call demands additional deposit. Q8. “Variation margin” refers to: A) Daily settlement gains or losses added to or subtracted from the account (mark‑to‑market) B) Initial deposit C) Exchange fees D) Broker commission Correct Answer: A Explanation: Futures accounts are marked to market daily; variation margin is the cash flow reflecting daily P&L. Q9. A “clearinghouse” serves as:
A) A self‑regulatory organization (SRO) for the futures industry (registrations, ethics, arbitration) B) The government regulator C) An exchange D) A clearinghouse Correct Answer: A Explanation: NFA is an independent SRO designated by the CFTC. Q12. “Delivery” in a futures contract refers to: A) The transfer of physical commodity (or cash settlement) at contract expiry B) The daily settlement of gains C) The initial margin deposit D) The closing of a position before expiry Correct Answer: A Explanation: Most futures contracts are closed out before delivery, but delivery is the mechanism that aligns futures and cash prices.
Q13. Which commodity is cash‑settled (no physical delivery) in its futures contract? A) Crude oil (WTI) B) Corn C) S&P 500 E‑mini D) Gold Correct Answer: C Explanation: Equity index futures are cash‑settled based on index value; physical commodities usually deliverable. Q14. “Open outcry” trading has been largely replaced by: A) Electronic trading (e.g., CME Globex) B) Telephone trading C) Over‑the‑counter swaps D) Block trading only Correct Answer: A Explanation: Most exchanges now use electronic platforms; open outcry exists in limited capacity (e.g., options pit).
A) The maximum amount the price can move up or down from the previous day’s settlement before trading halts or limits expand B) The minimum price change C) The margin requirement D) The broker’s commission Correct Answer: A Explanation: Limits reduce volatility; can be expanded (e.g., variable limits). Q18. “Limit up” and “limit down” refer to: A) Price movement hitting the daily limit; trading may halt or be limited to that price B) The margin levels C) The maximum order size D) The maximum profit Correct Answer: A Explanation: When a limit move occurs, trading continues at that limit price (or may lock limit).
Q19. “Locked limit” means: A) No trades occur because all orders are at the limit but no opposite side, causing illiquidity B) Trading is suspended C) Limits are removed D) The market is closed Correct Answer: A Explanation: Locked limit can create illiquidity. Q20. An “exchange‑for‑physical” (EFP) transaction involves: A) Simultaneous exchange of a futures position for a physical commodity position, negotiated off‑exchange but reported to exchange B) Cash settlement only C) Exercise of an option D) Spread trading Correct Answer: A Explanation: EFPs allow hedgers to adjust basis.
A) Delivery against futures contracts (evidence of stored commodity) B) Margin deposits C) Settlement of options D) Hedging basis Correct Answer: A Explanation: Deliverable commodity must be stored in exchange‑approved warehouses. Q24. “Convergence” is the tendency of futures prices and cash prices to: A) Become equal at contract expiration (due to arbitrage) B) Diverge widely C) Move randomly D) Remain constant Correct Answer: A Explanation: Arbitrage ensures convergence at expiration. Q25. “Contango” describes a market where:
A) Futures prices are higher than spot prices (positive carrying costs) B) Futures prices are lower than spot prices (backwardation) C) Prices are stable D) Prices are volatile Correct Answer: A Explanation: Contango is normal for storable commodities with storage costs. Q26. “Backwardation” occurs when: A) Spot prices are higher than futures prices (inverted market) B) Futures prices are higher C) Prices are in a range D) Volatility is low Correct Answer: A Explanation: Backwardation often indicates near‑term supply tightness. Q27. The “front month” is:
A) Closing a near‑term contract and opening a longer‑dated contract to maintain exposure B) Day trading the same contract C) Holding until delivery D) Exercising an option Correct Answer: A Explanation: Rolling avoids physical delivery and maintains market exposure. Q30. The “CME Group” includes all of the following except: A) Chicago Board of Trade (CBOT) B) New York Mercantile Exchange (NYMEX) C) Kansas City Board of Trade (KCBT) D) London Stock Exchange (LSE) Correct Answer: D Explanation: CME Group includes CBOT, NYMEX, KCBT, COMEX, but not LSE.
SECTION 2: FUTURES HEDGING (Q31–60)
Q31. A “short hedge” is used by a: A) Producer (commodity seller) to lock in a selling price B) Consumer (commodity buyer) to lock in a purchase price C) Speculator betting on lower prices D) Arbitrageur Correct Answer: A Explanation: Short hedge: sell futures to protect against falling cash prices. Q32. A “long hedge” is used by a: A) Commodity buyer (e.g., miller, refiner) to lock in a purchase price B) Commodity seller C) Speculator betting on higher prices D) Option writer Correct Answer: A Explanation: Long hedge: buy futures to protect against rising cash prices.
Q35. “Basis” is defined as: A) Cash price minus futures price B) Futures price minus cash price C) The difference between two futures contracts D) The option premium Correct Answer: A Explanation: Basis = cash – futures. Strengthening basis means cash outperforms futures. Q36. If a corn farmer hedges by selling December futures at $5.00/bu and the cash price at harvest is $4.80/bu and December futures is $4.85/bu, the basis at harvest is: A) – $0.05 ($4.80 – $4.85) B) +$0. C) – $0. D) $0. Correct Answer: A Explanation: Basis = cash – futures = 4.80 – 4.85 = – 0.05.
Q37. The farmer’s net selling price after the hedge is: A) Futures sale price + basis (or futures – initial basis difference) B) Cash price only C) Futures price only D) Option premium Correct Answer: A Explanation: Net price = futures selling price + (cash – futures at lifting) = $5.00 + ($4.80 – $4.85) = $4.95. Q38. “Perfect hedge” occurs when: A) Basis remains unchanged (zero basis risk) B) Prices move exactly opposite C) No margin call D) Delivery is taken Correct Answer: A Explanation: Perfect hedge eliminates price risk; basis risk remains.
