Mark-to-Market (MTM) is a daily settlement process in futures
trading where profits or losses are calculated based on the change in the
contract's settlement price compared to the previous day.
These gains or losses are credited or debited from your trading ledger daily,
ensuring that your margin account reflects your real-time P&L (Profit and
Loss).
Example: MTM Settlement over 4 Days
Let’s break it down:
Trade Executed: Buy 1 lot of XYZ futures @ ₹25,000 (Lot size = 75)
Margin Blocked: ₹1,25,000
Day Qty Trade Price Settle Price MTM P&L (₹)
Day 1 75 25,000 25,010 750
Day 2 25,135 9,375
Day 3 24,900 -17,625
Day 4 -75 Sell @ 24,850 -3,750
Total: -11,250
Explanation of MTM Calculations
Day 1:
MTM = (25,010 - 25,000) × 75 = +₹750
Day 2:
MTM = (25,135 - 25,010) × 75 = +₹9,375
(Total gain so far: ₹10,125)
Day 3:
MTM = (24,900 - 25,135) × 75 = -₹17,625
(Net MTM: ₹10,125 - ₹17,625 = -₹7,500)
Day 4:
Closing trade at 24,850
MTM = (24,850 - 24,900) × 75 = -₹3,750
(Final net: -₹7,500 - ₹3,750 = -₹11,250)
✔️ Final Outcome:
Buy at ₹25,000 → Sell at ₹24,850 = Loss of ₹150 × 75 = ₹11,250
Which matches the cumulative MTM over 4 days.
⚠️ Margin Calls:
If your MTM losses reduce your available margin below the required level, a
margin call is triggered. You’ll need to:
Add more funds to your account Or risk a square-off of your position by the
broker to limit further losses.