What is Mark to Market (MTM) in Futures?

Mark to Market (MTM) is the process of valuing an open position at its current market price and recording the resulting gain or loss. In futures trading, the contract is “marked to market” based on the daily settlement price. 

The profit or loss arising from the day’s price movement is credited to or debited from the trader’s account, according to the applicable exchange and clearing mechanism.

What is MTM Loss in Trading?

For a long futures position, a fall in the futures settlement price generally creates an MTM loss. For example:

• Suppose a trader buys futures at ₹20,000.
• The settlement price is ₹19,800.
• The total contract quantity is 50.

Now, MTM Loss can be calculated as follows:

• MTM Loss =(₹19,800 − ₹20,000) x 50 = −₹10,000

For a short position, the calculation works in the opposite direction. Note that MTM is separate from the final profit or loss that may arise when the position is closed.

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