Definition
Mark Price
Mark price is a fair reference price used to value open positions and calculate margins, avoiding manipulation by stray trades.
Rather than using the last traded price — which can be distorted by a single odd trade in an illiquid contract — exchanges and brokers use a mark price (often derived from the order book or a theoretical model) to value positions for margin and MTM purposes.
On the NSE and at Indian brokers, the mark price helps ensure that mark-to-market gains and losses, and the resulting margin requirements, reflect a realistic value. It protects both the trader and the system from a misleading last-traded price in thin strikes or far-month contracts.
Related terms
- Mark to MarketMark to market (MTM) is the daily settlement of profit or loss on a futures position based on that day's closing price.
- SPAN MarginSPAN margin is the core risk-based margin for F&O positions, calculated by simulating worst-case price and volatility moves.
- MarginMargin is the upfront money a trader must keep with the broker as collateral to take a leveraged futures or options position, set by the exchange to cover potential losses.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.