What is Mark-to-Market (MTM) in derivatives?

What Is Mark-to-Market (MTM) in Derivatives?

Mark-to-Market (MTM) is the daily revaluation of open positions to the current market price. In derivatives, MTM determines day-end gains or losses and affects your available funds and margins. MTM applies differently to futures and options.

What is MTM?

MTM is calculated daily at market close, compares your position price to the official settlement price, and credits or debits the difference.

How does MTM work by instrument?

  • Futures
    • MTM applies daily. Profit or loss for the day is settled in cash after the market closes.
    • Positive MTM increases available funds. Negative MTM reduces margins and can trigger margin calls if balances fall short.
  • Options
    • No daily MTM settlement. Options are not cash settled day by day like futures.
    • Buyer and seller P&L changes with premium movements in real time.
    • P&L is realised when you exit the option or at expiry. Index options settle in cash on expiry. Stock options that finish in the money settle by physical delivery as per exchange rules.

Frequency & valuation

  • Frequency: Daily at the end of the day for MTM settlement on futures.
  • Valuation basis: Exchange published settlement price for the contract on that day.
  • Intra-day moves: Do not trigger MTM settlement, but can affect margins due to risk checks.

Funds impact & ledger flow

  • Futures positive MTM: Credited to your account and increases free collateral.
  • Futures negative MTM: Debited from your margin balance. You may need to add funds to avoid a shortfall.
  • Options: Premium debit or credit happens when you trade. Subsequent changes in premium affect your unrealised P&L. Final cashflows occur on exit or expiry.

Quick example

  • Futures long at 10,000; day’s settlement 10,150: Day MTM = +150 per unit credited.
  • Futures long at 10,000; day’s settlement 9,900: Day MTM = −100 per unit debited.
  • Option buyer: Buy at ₹12, later sell at ₹18 → Realised P&L = ₹6 × lot size. No daily MTM settlement in between.
Futures settle MTM daily, while options realise P&L on exit or at expiry, so plan funds and margins accordingly.

What if...

ScenarioOutcome
I hold a futures position overnightDaily MTM credit or debit is posted after market close.
My futures MTM turns negative, and margins dropYou may receive a margin call or face risk reduction if funds are insufficient.
I hold an option that is in the money at expiryIndex options settle in cash. Stock options can go to physical delivery.
I close my option before expiryP&L is realised based on the difference between the entry and exit premiums.
I want to see today’s effect on fundsCheck end of day ledger or the funds section for futures MTM and options realised or unrealised P&L.

Last updated: 06 Nov 2025

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