Does MTM settlement apply to options trading?
No, the Mark to Market (MTM) settlement process does not apply to options contracts. MTM settlement is a mechanism used for futures contracts, where the daily gains and losses are calculated and settled based on the market price of the underlying asset.
Why MTM is Not Used for Options
- In options trading, profits and losses are realized when the option is either exercised or closed before expiry.
- Options are not marked to market daily; instead, their value fluctuates based on the underlying asset's price, volatility, time to expiry, and other factors.
- The value of an option is updated in real-time, but it is not subject to daily settlement as in futures contracts.
What if...
| Scenario | Outcome |
|---|
| You hold an in-the-money option | The option's value reflects the difference between market price and strike price but is not subject to MTM |
| You let an option expire | You either profit (if in-the-money) or lose the premium paid (if out-of-the-money) |
| You close your position before expiry | Profit or loss is realized based on the premium difference and position exit price |
Tip: Keep an eye on real-time options pricing, as MTM settlement is not involved in options trading, unlike futures contracts.
Last updated: 27 Jun 2025
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