Mark to Market

Mark to market (MTM) is the daily process by which the profit or loss on open futures and options positions is calculated and settled in cash at the end of each trading session, based on the official settlement price published by the exchange. If a position has moved in the trader's favour, the MTM gain is credited to their account; if it has moved against them, the MTM loss is debited and must be covered. This daily cash settlement mechanism—enforced by exchanges like MCX and NSE through their clearing corporations—prevents the accumulation of large unrealised losses and reduces systemic counterparty risk in the derivatives market. Maintaining adequate margin to cover MTM losses is essential for all futures traders.