{"id":12217,"date":"2026-05-22T13:38:56","date_gmt":"2026-05-22T13:38:56","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/mark-to-market-mtm\/"},"modified":"2026-05-22T13:38:56","modified_gmt":"2026-05-22T13:38:56","slug":"mark-to-market-mtm","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/mark-to-market-mtm\/","title":{"rendered":"Mark to Market (MTM)"},"content":{"rendered":"<p>Mark to Market &#x2014; or MTM &#x2014; is the daily process of valuing open <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/futures-and-options\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">futures and options<\/a> positions at the closing price and crediting or d<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/ebit\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>ebit<\/a>ing the resulting profit or loss to the trader&rsquo;s account. It is the mechanism that keeps the <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/derivatives\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">derivatives<\/a> market financially safe and is the source of those overnight credits and debits F&amp;O traders see every day.<\/p>\n<div><strong>Key takeaways:<\/strong>\n<ul>\n<li>MTM is the daily revaluation of <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/open-position\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">open position<\/a>s at the official closing price.<\/li>\n<li>Profits are credited and losses debited each day, even though the trade has not been closed.<\/li>\n<li>It applies to futures and short option positions; long options are settled on closure or expiry.<\/li>\n<li>MTM losses can cause <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/margin-call\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">margin call<\/a>s; pe<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/rsi\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>rsi<\/a>stent shortfalls lead to forced <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/square-off\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">square off<\/a>.<\/li>\n<li>For income-<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/tax\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>tax<\/a> purposes, F&amp;O profits and losses follow trade-based accounting, not MTM.<\/li>\n<\/ul>\n<\/div>\n<h2 id=\"how-daily-mtm-works\">How daily MTM works<\/h2>\n<p>Take a single <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/nifty\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Nifty<\/a> futures lot sold at 22,200. At the end of the day, Nifty futures settle at 22,150 &#x2014; a 50-point fall. The short position gains 50 &#xD7; 25 = &#x20B9;1,250. The exchange credits &#x20B9;1,250 to the trader&#x2019;s margin account and debits &#x20B9;1,250 from the long counterparty&#x2019;s account.<\/p>\n<p>The next morning, the position is treated as if it were freshly opened at 22,150. Any further movement triggers a new MTM cycle. This daily reset prevents one party&#x2019;s losses from snowballing without being recognised.<\/p>\n<h2 id=\"why-mtm-exists\">Why MTM exists<\/h2>\n<p>Imagine a <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/futures-contract\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">futures contract<\/a> held for three months. Without MTM, a buyer could rack up huge unrealised losses, then default at expiry. Daily MTM forces participants to settle their P&amp;L every 24 hours, ensuring that the clearing corporation never has to chase enormous unpaid bills. It is the financial plumbing that makes the exchange-traded <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/derivative\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">derivative<\/a>s market trustworthy.<\/p>\n<h2 id=\"mtm-and-margin-requirements\">MTM and margin requirements<\/h2>\n<p>Your margin balance is the combination of initial SPAN + <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/exposure-margin\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Exposure margin<\/a> plus or minus MTM gains\/losses. If MTM losses push your balance below the maintenance level, the <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/broker\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">broker<\/a> issues a margin call. If you do not deposit additional funds promptly, the broker can square off your position to recover the shortfall.<\/p>\n<h2 id=\"mtm-in-options\">MTM in options<\/h2>\n<p>For short option positions (call writes or put writes), MTM works as it does for futures &#x2014; the change in <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/premium\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">premium<\/a> is debited or credited daily. For long option holders, the broker usually does not pass through daily MTM as cash; instead, the option&#x2019;s <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/market-value\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">market value<\/a> is reflected in your <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/portfolio\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">portfolio<\/a>. Realised P&amp;L appears only when you square off or on expiry.<\/p>\n<h2 id=\"reading-mtm-in-your-ledger\">Reading MTM in your ledger<\/h2>\n<p>Most brokers show MTM as a separate line item: open MTM, realised MTM, and the net change. The contract note breaks these out daily. Active F&amp;O traders should reconcile MTM against their own records to spot any errors quickly.<\/p>\n<h2 id=\"practical-implications-for-traders\">Practical implications for traders<\/h2>\n<ul>\n<li>Always keep a buffer of free margin so a single bad day does not trigger forced square off.<\/li>\n<li>Be aware that holding a losing position overnight crystallises that loss in your account temporarily &#x2014; even if the price bounces back tomorrow.<\/li>\n<li>For tax reporting, do not get confused by MTM; you book profit or loss when the trade actually closes (futures expiry or buy-back).<\/li>\n<\/ul>\n<h2 id=\"frequently-asked-questions\">Frequently asked questions<\/h2>\n<div>\n<h3 id=\"is-mtm-the-same-as-my-p-l\">Is MTM the same as my P&amp;amp;L?<\/h3>\n<p>MTM is an accounting concept used daily by the exchange. Your real P&amp;L is the difference between entry and final exit prices. They match over the full life of the trade.<\/p>\n<h3 id=\"what-if-my-account-balance-goes-negative-due-to-mtm\">What if my account balance goes negative due to MTM?<\/h3>\n<p>You must clear the debit by the next <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/trading\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">trading<\/a> day. Brokers may stop further trading until funds are added.<\/p>\n<h3 id=\"does-cash-equity-have-mtm\">Does cash <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/equity\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">equity<\/a> have MTM?<\/h3>\n<p>No. Cash equity trades settle on T+1 in full; there is no daily revaluation while you hold <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/shares\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">shares<\/a>.<\/p>\n<h3 id=\"how-is-mtm-calculated-for-stock-futures\">How is MTM calculated for stock futures?<\/h3>\n<p>Same formula: (closing settlement price &#x2212; previous settlement price) &#xD7; <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/lot-size\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">lot size<\/a>, with sign flipped if you are short.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Mark to Market &#x2014; or MTM &#x2014; is the daily process of valuing open futures and options positions at the closing price and crediting or debiting the resulting profit or loss to the trader&#x2019;s account. It is the mechanism that keeps the derivatives market financially safe and is the source of those overnight credits and [&#x2026;]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-12217","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"Mark to Market &#x2014; or MTM &#x2014; is the daily process of valuing open futures and options positions at the closing price and crediting or debiting the resulting profit or loss to the trader&#x2019;s account. It is the mechanism that keeps the derivatives market financially safe and is the source of those overnight credits and&hellip;","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12217","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12217\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=12217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}