What Is ‘Mark-to-Market’ and How Does It Relate to the Settlement of Futures and Options on Futures?
Mark-to-market (MTM) is the daily process of adjusting the value of a futures contract to reflect its current market price. This means profits and losses are credited or debited to the margin accounts daily.
For options on futures, MTM ensures that the option's value reflects the latest market conditions. This daily settlement mechanism is a key reason why European-style options on futures are preferred, as early exercise would disrupt the standardized MTM process.
