Mark to Market

Q: Is mark to market a loss or just a revaluation?

For futures it is both: the position is revalued at the settlement price and the difference is settled in cash the same evening, so a losing day reduces the ledger balance immediately. For options the daily MTM figure is a revaluation; cash moves only at trade (premium) and at expiry.

Q: When is MTM debited or credited on NSE?

NSE Clearing settles daily MTM on T+1, the business day after the trade day, through clearing members’ bank accounts. Brokers reflect the debit or credit in the client ledger on the evening of T itself so that the next day’s margin is computed on the updated balance.

Q: Which price is used for daily mark to market?

The daily settlement price, which for NSE futures is the volume-weighted average of trades over the closing window of the derivatives session. It is not the last traded price. On expiry day the final settlement price is the closing value of the underlying: built from closing-auction prices since 3 August 2026, and from 7 December 2026 from the last 30 minutes of continuous trading (15:00 to 15:30).

Q: Does mark to market apply to option buyers?

Not as a cash settlement. A buyer pays the full premium at purchase and has nothing further to pay; the position’s value changes daily but no money moves until it is sold or settled at expiry. Option writers are affected through daily recomputation of their margin.

Your futures position is cashed up and restarted every single evening. The MTM is the reason a losing trade empties your ledger long before expiry.

In short: mark to market (MTM) is the daily settlement of futures contracts. At the close, every open position is revalued at the day’s settlement price; the difference from the previous settlement (or the trade price, for positions opened that day) is debited from the loser and credited to the winner through the clearing corporation. Options are premium-settled, so their MTM is a notional ledger figure rather than a cash settlement, except for the writer’s margin.

The intuition

A futures contract is a promise about a price weeks away, but nobody in the chain wants to wait weeks to find out whether the other side can pay. So the exchange breaks the promise into daily pieces. Each evening it asks one question: if this contract were closed at today’s settlement price, who would owe whom? That amount changes hands immediately. Tomorrow the contract starts again from today’s settlement price, as if it had been bought there.

The effect is that a futures position never builds up a large unpaid loss. Losses are collected in cash daily, which is what makes it safe for the clearing corporation to guarantee every trade. The margin you posted is not the money you lose; it is the deposit that covers the part of tomorrow’s move that has not been settled yet.

Formula

Daily MTM = (today’s settlement price − reference price) × lot size × number of lots, with sign flipped for a short position

The reference price is the trade price for a position opened today, and yesterday’s settlement price for a position carried overnight. For NSE index and stock futures, the daily settlement price is the volume-weighted average of trades over the closing window of the derivatives session; on expiry day the final settlement price is the underlying’s closing value: built from closing-auction prices since 3 August 2026, and from 7 December 2026 from the last 30 minutes of continuous trading (15:00 to 15:30), under SEBI’s circular of 15 October 2026.

Worked example (illustrative numbers)

Suppose a trader buys one lot (65 units) of Nifty futures at 24,000 on Monday morning and holds it for three sessions.

Day	Settlement price	Move from reference	MTM cash flow per lot
Monday	23,850	−150 (from trade price 24,000)	−₹9,750
Tuesday	24,120	+270 (from 23,850)	+₹17,550
Wednesday	24,060	−60 (from 24,120)	−₹3,900
Net after three days			+₹3,900

The net equals (24,060 − 24,000) × 65, exactly what the trader would have made by closing at Wednesday’s settlement. Nothing is gained or lost by the daily settlement; it only changes when the cash moves. The Monday debit of ₹9,750 is real, though: it leaves the ledger that evening, and if the ledger cannot cover it the broker makes a margin call.

The same position, settled three times. Each bar is cash that actually moves that evening; the line is the price the contract restarts from.

Why it matters to an options trader

It is the engine behind margin calls. Margin is a deposit; MTM is the bill. A trader with exactly the initial margin and a losing day is short by the evening.
Option writers feel it through margin, not cash. A written option is not cash-settled daily, but its margin requirement is recomputed on the new price, so a move against the writer raises the blocked amount with the same practical effect.
It explains futures liquidity near the close. Because the settlement price is a weighted average over the closing window, large players trade into that window, and expiry-day settlement of options is anchored to the same calculation.
It is why hedges must be funded. A futures hedge against a stock portfolio can lose cash daily while the shares only show a paper gain; the hedge needs its own cash buffer.

Common mistakes

Treating margin as the maximum loss. Margin is roughly a two-day worst case; a position held through several bad days loses far more, debited each evening.
Confusing a notional MTM with cash. Broker apps show an MTM figure for options too, but only futures (and the final settlement of options) move cash; the rest is a revaluation.
Forgetting the credit side. MTM profits arrive the next morning (T+1) and are usable; traders who pyramid on them before the credit lands get shortfall penalties.
Settling against the last traded price. The settlement price is a weighted average over the closing window, which can differ from the final tick by several points on a volatile close.

Indian-market specifics

NSE Clearing settles daily MTM on futures on T+1: losses are debited from, and profits credited to, clearing members’ bank accounts the next business day, and brokers pass the entries to client ledgers the same evening (source: NSE equity derivatives settlement mechanism page). Clearing members may opt to pay MTM on T+0 once a quarter.
Daily settlement price for futures: volume-weighted average price over the closing window of the derivatives session. Final settlement price: the underlying index or stock closing price, closing-auction based since 3 August 2026 and a last-30-minute VWAP of continuous trading from 7 December 2026.
Options are premium-settled, also on T+1; there is no daily cash MTM on an option position, only on the written option’s margin. Index options settle in cash at expiry; stock options that finish in the money are physically settled (see physical settlement).
Under SEBI’s peak-margin framework (fully effective 1 September 2021), margin must be in the account upfront; an MTM loss that erodes it below the requirement is a shortfall that the broker must collect or square off.

FAQ

Is mark to market a loss or just a revaluation?

For futures, real cash; for options, a revaluation until premium or expiry settlement.

When is MTM debited or credited on NSE?

Settled T+1 at the clearing corporation; shown in the client ledger the same evening.

Which price is used for daily mark to market?

The last-30-minute volume-weighted average, not the last tick.

Does mark to market apply to option buyers?

No cash MTM for buyers; writers feel it through margin.

Track the futures basis and settlement through the week

The futures page shows Nifty and Bank Nifty futures against spot from the latest session. In the app, the Option Chain page shows every strike with Greeks, and OI Intelligence classifies build-ups so you can see where the daily settlement is pushing positions.

Futures overview Futures margin calculator

Related terms

Initial Margin, the deposit MTM is debited against
Margin Call, what happens when MTM empties the deposit
Futures Contract, the instrument that is marked daily
Cash Settlement, the final MTM at expiry