Trading term

What is Mark-to-market?

Mark-to-market is the daily process of revaluing an open position at the current market price and settling the gain or loss into the trader's account. In futures, profits and losses are credited or debited every day — not just when the position closes — which keeps leverage safe for the exchange and drives margin calls.

Rather than waiting until a position is closed to tally the result, futures are 'marked to market' at the end of each trading day. The exchange takes the day's settlement price, calculates each account's gain or loss, and moves that cash between accounts overnight: winners are credited, losers are debited. By the next morning, everyone's margin reflects reality. This daily settlement is why a futures position's paper profit becomes real cash day by day, and why paper losses drain your margin in real time.

Mark-to-market is the exchange's core risk-control mechanism. Because losses are collected daily, no trader can quietly accumulate a huge unpaid loss — the moment their margin runs low, they get a margin call or are liquidated. This keeps the clearinghouse solvent and the market trustworthy. For the trader, it means you can't ignore an open position: adverse moves hit your account immediately, and a string of bad days can force you out long before your longer-term view has a chance to play out.

Mark-to-market settles daily
Daily gain/loss settled into your account ($ thousands)+$1,000Mon−$2,500Tue+$1,400Wed+$800Thu−$1,100Fricash moves in or out every day — you never closed the trade

Each day, the gain or loss on an open futures position is settled in cash into the account — credited on up days, debited on down days. You never closed the trade, yet cash moves every day.

For example

You're long one future at $50. It settles at $51 today — $1,000 (per contract) is credited to your account overnight. Tomorrow it settles at $48.50 — $2,500 is debited. You never closed the trade, yet cash moved into and out of your account each day as it was marked to market.

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Why it matters to you

Mark-to-market is what makes futures leverage safe for the system and unforgiving for the trader — losses are collected daily, so they can't be hidden or deferred. Understanding it explains why futures require constant attention: your account balance moves every day whether or not you close the position.

⚠ Daily losses can force you out early

Because losses are settled daily, a leveraged trader can be right about the eventual direction yet be marked-to-market into a margin call and liquidated during a temporary adverse swing. Ignoring the daily cash drain — assuming you can just 'hold through it' like a stock — is how futures traders get stopped out at the worst possible moment.

Frequently asked questions

What is mark-to-market in futures?

Mark-to-market is the daily revaluation of open futures positions at the settlement price, with the resulting gain or loss credited or debited to each account overnight. Profits and losses are realised in cash every day, not just when the position is finally closed.

Why are futures marked to market daily?

To control risk. By collecting losses daily, the exchange prevents any trader from building up a large unpaid loss that could threaten the clearinghouse. It keeps every account's margin current and triggers margin calls promptly, which is what makes highly leveraged futures markets safe to operate.

How does mark-to-market affect my account?

Your balance changes every day your position is open: gains are added and losses subtracted based on the daily settlement price. A run of adverse days drains your margin in real time and can trigger a margin call, even though you haven't closed the trade.

What's the difference between mark-to-market and settling at close?

Stocks realise gains and losses only when you sell. Futures settle daily via mark-to-market — cash moves in and out of your account every day based on the settlement price. So a futures loss hits your balance immediately, while an unsold stock's loss stays on paper.

Related terms

BackwardationBackwardation is when futures prices are lower for later delivery dates — the futures curve slopes downward. It often signals tight near-term supply or strong demand for immediate delivery. For futures holders it creates a positive 'roll yield,' as they sell pricier near-term contracts and buy cheaper later ones.BasisBasis is the difference between an asset's futures price and its current spot (cash) price. It reflects carrying costs, supply and demand, and time to expiry — and it converges to zero as the contract nears expiration, since a future about to settle must match the spot price. Traders watch basis to gauge conditions and to hedge.CFD (contract for difference)A CFD (contract for difference) is a derivative where you and a broker agree to exchange the difference in an asset's price between opening and closing the trade. You never own the underlying — you simply profit or lose on the price move, with leverage. CFDs cover stocks, indexes, commodities and crypto, and are popular outside the US, where they're banned.ContangoContango is when futures prices are higher for later delivery dates — the futures curve slopes upward. It usually reflects the costs of storing and financing an asset until delivery. Contango creates a 'roll cost' for anyone holding futures over time, as they repeatedly sell cheaper near-term contracts and buy pricier later ones.
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