Stock Market · Futures Trading

Mark-to-market

Mark-to-market (MTM) is the daily settlement mechanism in futures. Unlike stocks where your P&L is unrealised until you sell, futures settle every single day. Cash is actually moved between winners and losers.

How MTM works

At the end of each trading day, the exchange calculates the daily settlement price for every futures contract. The change in value from the previous settlement is credited or debited from your account that night.

Day 1: Buy Nifty futures at 22,000. Settlement price: 22,100.

MTM profit: (22,100 − 22,000) × 75 = ₹7,500 credited to account tonight.

Day 2: Settlement price falls to 21,900.

MTM loss: (21,900 − 22,100) × 75 = −₹15,000 debited from account tonight.

> Even if you don't sell, money is moved daily. This is fundamentally different from equity delivery.

Why MTM exists

Without daily settlement, the loser might not have money to pay at contract expiry. MTM ensures the clearing corporation collects losses daily. Eliminating counterparty risk. The system only fails if losses exceed the entire margin in a single day, which is why margin requirements exist.

DailyProfits and losses are real cash, settled every evening

MTM and margin

If cumulative MTM losses reduce your margin below the maintenance level, you get a margin call. You must deposit funds by the next morning or positions are squared off.

This means futures traders must maintain a cash buffer beyond the initial margin. Don't deploy 100% of capital into futures margin. Keep 20–30% extra for potential MTM calls.

Takeaway. Futures P&L settles daily in cash. You gain or lose real money every evening. Maintain extra cash beyond initial margin to survive MTM adverse moves without forced liquidation.