What Is ‘Marking to Market’ in the Context of Futures Trading?
Marking to market is the daily process of adjusting a futures trader's margin account to reflect the gains or losses from the previous day's trading. At the end of each trading day, the contract's value is settled to its current market price.
Profits are credited to the trader's account, and losses are debited. This daily settlement process ensures that traders have sufficient funds to cover potential losses and minimizes the risk of default for the clearing house.
