Mark to market

Mark to market is the practice of revaluing a position at the end of each trading day to reflect its current market price, rather than the price it was originally bought or sold at. It is the standard accounting method for futures contracts, where gains and losses are realized daily rather than only when the position is eventually closed.

In a futures account, this means the exchange's clearinghouse calculates the day's profit or loss on every open contract based on that day's settlement price, then credits or debits the difference directly to each trader's account in cash. A trader who is long a contract that rose in price receives cash that day, while one whose contract fell has cash removed. This daily cash settlement is what keeps futures markets solvent, since it prevents losses from silently building up unnoticed over weeks or months.

Mark to market matters to a trader because it turns paper gains and losses into real cash flows in and out of the account every single day. If enough daily losses accumulate, the account's equity can fall below the maintenance margin, triggering a margin call even if the trader still believes the position will eventually turn profitable. The same daily revaluation also applies more broadly outside futures, brokers and fund administrators mark most tradable securities to their current market price for reporting purposes, rather than carrying them at the original purchase cost.