Welcome to Price Limits, the unit that explains the guardrails an exchange puts on how far a futures price can travel in a single session, and what happens to traders when the market presses against those rails. The mechanics here (how a limit caps the print, why exchanges widen limits, how a locked market traps a losing position, and how a broad circuit breaker differs from a per-contract limit) show up throughout the futures side of the exam.
Exam Weight: Part 1 spans ~71% of the exam across Chapters 1-7 combined; the National Futures Association (NFA) does not publish per-unit weights.
Video Resources
What You'll Learn
In this unit, you'll cover:
- Effect of Limit-Up/Down Price Change: What a daily price limit is, how it is measured from the prior session's settlement price, and why reaching the limit caps the price but does not freeze all trading
- Expanded Limits: Why exchanges widen the allowable daily limit after a limit-move session, and how the expansion steps up (then narrows back) so the price can find its true level
- Effects on Margin of Limit Moves: Why performance-bond (margin) requirements rise alongside limit moves, and how a trader trapped in a losing position drives the exchange to demand more collateral
- Lock Limit: The one case where trading genuinely stops, why it is caused by an order imbalance rather than by the limit itself, and how a trader gets "locked in"
- Circuit Breakers: The market-wide, percentage-based halts used in stock-index futures, and how to keep them straight from a per-contract daily price limit
Why This Matters
Series 3 candidates work with clients whose positions can be pinned by a fast market, so understanding what a limit does (and does not do) is core to explaining risk. Two ideas run through the whole unit:
- A daily price limit is a per-contract boundary that blocks trades beyond it but still allows trading at or within it
- A circuit breaker is a broad, coordinated halt tied to a percentage move
Get those two apart and most price-limit questions become straightforward reasoning rather than memorization.
Let's start with what a daily price limit actually does to the price.