Mark to Market

How it works

Mark to Market means a position is revalued at the current market price, and in futures it is settled in cash *every single day*. At the end of each trading session, the exchange compares the day's closing price to your entry (or previous day's close). If the move went your way, the profit is credited to your trading account; if it went against you, the loss is debited. By the next morning your position is reset to the latest price. This is why your effective cost basis in a future keeps updating.

Why it matters

Daily MTM is the mechanism that keeps the derivatives system safe. By settling profit and loss every day rather than only at expiry, the exchange ensures losses can't pile up unnoticed. If your account balance falls below the required margin after an MTM loss, your broker issues a margin call — you must add funds, or your position is squared off.

In India

NSE futures on indices and stocks are marked to market daily, with MTM debits/credits visible in your Zerodha or Upstox ledger. Combined with SEBI's strict upfront and peak-margin rules, MTM means F&O traders must keep adequate buffer cash, not just the bare minimum margin.

Common mistakes

Newcomers think a futures loss only "counts" when they close the trade — but MTM debits hit the account daily, and a few adverse sessions in a row can trigger a forced square-off at the worst possible time, locking in a loss just before a recovery. Others ignore the cash needed for MTM swings, deploying the bare minimum margin with no buffer, then scramble when a margin call lands. There is also confusion at expiry: profits and losses you've been settling daily are already in your account, so the final settlement only covers the last day's move. Always size positions so a normal adverse move won't blow through your margin, keep spare funds ready for daily MTM debits, and monitor positions through the session rather than assuming you can ride out a drawdown the way you might with delivery equity — leverage plus daily settlement leaves little room for hope-based holding.