What is Mark to Market in Futures?

Definition
Mark to market is the daily process of adjusting your futures account balance based on the market value of your open positions. Gains and losses are settled at the end of each trading day, meaning profits are added to your account and losses are subtracted, whether or not you’ve closed the trade.

Why Mark to Market Exists

Unlike stocks or crypto, where your gains and losses aren’t realized until you close the trade, futures work differently. Futures accounts are settled daily through mark to market. If your position goes up, your account is credited. If it drops, your account is debited.

This system exists to protect both the trader and the broker. It ensures that:

• You have enough funds to cover potential losses
• Unrealized gains don’t create a false sense of account value
• Margin calls are issued in real time, not after it’s too late

It’s part of what keeps the futures market stable, even during big price swings.

How Mark to Market Works

At the end of each trading day, the exchange sets a daily settlement price. This price is used to calculate the value of every open position.

Let’s say you’re long 1 Micro Gold (/MGC) contract at $2,000.

• If the settlement price that day is $2,020, your account is credited $200

• If the next day it drops to $1,990, your account is debited $300

This process happens automatically every day you hold the position. You don’t need to close the trade to see gains or losses since they’re realized daily.

Example: Mark to Market in Action

Let’s say David buys 1 Micro Gold futures contract (/MGC) at a price of $2,300. Each /MGC contract represents 10 ounces of gold, and the contract moves in 0.10 increments, where each tick is worth $1.

Day 1

• Settlement price: $2,315
• Change: $2,315 − $2,300 = +$15
• Dollar gain: $15 × 10 ounces = $150 gain

David’s account is credited $150.

Day 2

• Settlement price: $2,295
• Change: $2,295 − $2,315 = −$20
• Dollar loss: $20 × 10 ounces = $200 loss

David’s account is debited $200.

Day 3

• Settlement price: $2,300
• Change: $2,300 − $2,295 = +$5
• Dollar gain: $5 × 10 ounces = $50 gain

David’s account is credited $50.

Recap

Even though the current price is back to his entry point of $2,300, his account balance has already been adjusted each day:

• Day 1: +$150
• Day 2: −$200
• Day 3: +$50
• Net P&L: $0

The daily gains and losses have balanced out, but the cash flow happened daily through the mark to market process. That’s why traders need to manage cash and margin proactively, even when they plan to hold a position longer term.

When Does Mark to Market Happen?

Mark to market typically occurs after the close of the trading day, once the daily settlement price is published by the exchange. While your account value may change in real time during the day, it’s the settlement price that determines your official daily P&L.

After this adjustment, your new equity balance is updated and the next day starts with a clean slate.

Why It Matters for Risk Management

Mark to market plays a major role in risk control:

• It limits unchecked losses by adjusting your account daily
• It enforces margin discipline, preventing over-leveraged positions
• It triggers margin calls when losses reduce your available funds

This daily settlement model is part of what separates futures from other types of leveraged trading. It forces active monitoring and quick decision-making, even if you’re holding positions for more than a day.

How Is the Daily Settlement Price Calculated?

The daily settlement price is set by the exchange, usually based on a volume-weighted average of trades during a short time window at the end of the trading day.

In highly liquid contracts, the settlement might reflect the last few trades. In lower-volume products, it might factor in bid-ask levels or theoretical models to ensure a fair and stable closing price.

Your mark-to-market gain or loss for the day is calculated using this price, not the last tick or the highest or lowest price of the day.

Daily Settlement vs. Final Settlement

• Daily settlement (mark to market) happens every day a position is open.

• Final settlement happens when a contract expires.

If you hold a position through expiration, it will be settled one last time. Depending on the contract, that might mean cash settlement or physical delivery. But most retail traders close or roll their positions before expiration and only experience daily settlement.

Unrealized vs. Realized Gains

• Unrealized gains and losses are changes in value that haven’t been locked in by closing a trade.

• Realized gains and losses are recorded when you exit the trade.

Futures blur the line a bit, because with mark to market, unrealized gains are credited to your account each day. But the position remains open, and the market can still swing the other way tomorrow.

You only fully realize your P&L when you close the trade — but the money comes in or out of your account daily while you hold it.

Can Mark to Market Trigger a Margin Call?

Yes. If daily losses reduce your equity below the required maintenance margin, your broker may issue a margin call. You’ll need to:

1. Deposit additional funds, or
2. Reduce your position size

If you don’t act, your broker may liquidate part or all of your position to bring your margin back into compliance. This is why monitoring your balance and staying aware of volatility is so important in futures trading.

Key Takeaway

Mark to market is a fundamental part of futures trading. It resets your account daily based on the real-time market value of your open positions.

• Gains are credited. Losses are debited.
• Your balance reflects market reality every day.
• It protects traders and brokers from large, hidden losses.
• And it enforces risk discipline through daily settlement and margin enforcement.

Whether you’re holding a position overnight or for weeks, mark to market affects your account every single day.

Mark to market affects more than just your daily balance — it can trigger a margin call if losses push your account below required levels. In the next article, we’ll explain what a futures margin call is, why it happens, and how to handle it when it shows up in your account.

Next lesson: What is a Futures Margin Call? →

Frequently Asked Questions