PSDA EXAM QUESTIONS AND
ANSWERS 100% PASS
What are commodities? - ANS Basic goods used in commerce, such as oil, aluminum, and
copper.
How much is traded daily in commodities across three sectors over CME? - ANS $1/4 trillion.
What is the role of producers in the commodities market? - ANS Producers supply and refine
commodities, taking a natural long position.
What is the role of consumers in the commodities market? - ANS Consumers utilize the good,
taking a natural short position.
What are hard commodities? - ANS Natural resources that must be mined or extracted, such
as gold, oil, and aluminum.
What are soft commodities? - ANS Agricultural and livestock products, such as coffee, wheat,
and corn.
What is hedging in the context of commodities? - ANS Using financial instruments to offset
the risk of adverse price movements.
What is a futures contract? - ANS An obligation to buy or sell an asset at a predetermined
price at a specified time in the future.
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What are the two forms of forward agreements? - ANS Futures and forwards.
What is the difference between exchange trading and OTC trading? - ANS Exchange trading
involves standardized contracts, while OTC trading is customized and privately negotiated.
What is a forward contract? - ANS A privately negotiated contract between two parties to
exchange an asset for a specified price at a future date.
What is basis in commodities trading? - ANS The difference between the spot price of a
physical commodity and the price of its future.
What is contango? - ANS A market condition where the futures price is above the expected
future spot price.
What is backwardation? - ANS A market condition where the futures price is below the
expected future spot price.
What is the spot price? - ANS The price at which an asset is bought or sold for immediate
delivery.
What is the convenience yield? - ANS The benefits associated with holding an underlying
product.
What is the significance of maturity dates in futures contracts? - ANS They are the fixed dates
at which a futures contract matures, differing among products.
What percentage of futures result in physical delivery upon expiration? - ANS Only 2.00%
result in physical delivery; most result in a cash settlement.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
ANSWERS 100% PASS
What are commodities? - ANS Basic goods used in commerce, such as oil, aluminum, and
copper.
How much is traded daily in commodities across three sectors over CME? - ANS $1/4 trillion.
What is the role of producers in the commodities market? - ANS Producers supply and refine
commodities, taking a natural long position.
What is the role of consumers in the commodities market? - ANS Consumers utilize the good,
taking a natural short position.
What are hard commodities? - ANS Natural resources that must be mined or extracted, such
as gold, oil, and aluminum.
What are soft commodities? - ANS Agricultural and livestock products, such as coffee, wheat,
and corn.
What is hedging in the context of commodities? - ANS Using financial instruments to offset
the risk of adverse price movements.
What is a futures contract? - ANS An obligation to buy or sell an asset at a predetermined
price at a specified time in the future.
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What are the two forms of forward agreements? - ANS Futures and forwards.
What is the difference between exchange trading and OTC trading? - ANS Exchange trading
involves standardized contracts, while OTC trading is customized and privately negotiated.
What is a forward contract? - ANS A privately negotiated contract between two parties to
exchange an asset for a specified price at a future date.
What is basis in commodities trading? - ANS The difference between the spot price of a
physical commodity and the price of its future.
What is contango? - ANS A market condition where the futures price is above the expected
future spot price.
What is backwardation? - ANS A market condition where the futures price is below the
expected future spot price.
What is the spot price? - ANS The price at which an asset is bought or sold for immediate
delivery.
What is the convenience yield? - ANS The benefits associated with holding an underlying
product.
What is the significance of maturity dates in futures contracts? - ANS They are the fixed dates
at which a futures contract matures, differing among products.
What percentage of futures result in physical delivery upon expiration? - ANS Only 2.00%
result in physical delivery; most result in a cash settlement.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
