What Is Mark-to-Market (MTM) in Futures Trading?

Short answer: Mark-to-market is the daily process of settling gains and losses on a futures position based on the day's closing price, crediting or debiting your account each day until you close the trade.

What MTM Means

In futures, your position is revalued at the end of each trading day against the daily settlement price. Any profit since the previous day is credited to your account, and any loss is debited. This daily settlement is called mark-to-market, and it continues every day you hold the position.

Why It Exists

MTM protects the system from the risk that a trader cannot pay up a large accumulated loss at expiry. By settling daily, the exchange ensures losses are collected as they occur, keeping the clearing system safe and reducing default risk.

Effect on Your Margin

Because losses are debited daily, your account balance shrinks on bad days. If it falls below the required maintenance level, you face a margin call and must top up funds. If you do not, your position can be squared off. On good days, profits are added and can be withdrawn or used elsewhere.

A Simple Illustration

If you are long a futures contract and the price falls during the day, the loss is taken from your account that evening. The next day, your position is marked from the new settlement price. Over the life of the trade, your total profit or loss equals the sum of all these daily adjustments.

Why It Matters for Risk

MTM means you need enough cash to absorb daily losses even before the trade is closed. A position that is ultimately profitable can still trigger a margin call along the way if it moves against you temporarily. This is a key reason to keep a margin buffer.

Practical Takeaway

Understand that futures are not settled only at expiry; they are settled every single day. Keep extra funds beyond the minimum margin so daily MTM swings do not force you out of a sound position, and monitor your account balance, especially in volatile markets.

This explainer was written by The Dispatch desk to answer a question readers commonly ask. It is general information, not personalised financial advice.