Define ‘Marking-to-Market’ in Futures Trading

Marking-to-market (MTM) is the daily process of adjusting the value of a futures contract to reflect the current market price. This involves settling the gains or losses on the contract each day, typically through the clearinghouse.

If a trader's position has gained value, the profit is credited to their margin account; if it has lost value, the loss is debited. MTM ensures that both parties' margin accounts accurately reflect the position's value and prevents the accumulation of large losses.