11.7What is mark-to-market (MTM)?
1What is it?
Mark-to-market means profits and losses on futures are settled every day at the day’s settlement price.
2Why does it exist?
Daily settlement stops losses from piling up unpaid. If your losses eat into margin, you must add money the same day.
3Calculation
Daily MTM = (Today’s settlement − Yesterday’s) × Lot
- Day 1: buy at 25,000. Settles 25,100 → +100 × 65 = +₹6,500 credited.
- Day 2: settles 24,900 → −200 × 65 = −₹13,000 debited.
- Day 3: settles 25,050 → +150 × 65 = +₹9,750 credited.
Net = +₹3,250 = (25,050 − 25,000) × 65.
4Quick revision
- P&L settled daily.
- Losses must be funded immediately.
5Knowledge check
Q1. Bought 1 lot at 25,000, settles 24,800. MTM?Show answer
−₹13,000.
Q2. Why daily settlement?Show answer
To prevent unpaid accumulated losses.
Q3. What if MTM loss exceeds free margin?Show answer
You must top up or the broker will close the position.