What is Mark to Market (MTM)?
Mark to market (MTM) is the daily revaluation of open derivatives positions against the exchange settlement or closing price, with profits credited and losses debited to your ledger. On NSE F&O, MTM runs on open futures and options positions so capital reflects current risk, not just entry price.
What mark to market means
MTM answers: if you closed today at the official price, what would your open book be worth? For futures, every point move against you reduces available margin. For long options, premium change flows through MTM until exit or expiry. Understanding MTM separates paper loss on open trades from realised outcomes.
Indian market context (NSE F&O)
NSE clears F&O daily. MTM on futures is typically settled daily to your account; deep MTM losses reduce available margin and can trigger margin calls or broker auto square-off. On expiry week, gamma and theta accelerate MTM on options — Bank Nifty weeklies can swing MTM sharply in the last two sessions.
Worked example
| Day | Nifty close vs entry | MTM per lot (illustrative) |
|---|---|---|
| Day 1 entry 24,200 | Close 24,260 (+60 pts) | +₹3,000 |
| Day 2 | Close 24,120 (−80 pts) | −₹4,000 |
| Day 3 square-off 24,180 | Realised vs entry −20 pts | −₹1,000 net if exited |
Common mistakes
- Judging strategy quality from one day of MTM without closed-trade stats.
- Ignoring MTM when calculating daily loss limit.
- Confusing premium paid for options with MTM — they interact but differ before expiry.
- Not exporting MTM history for weekly review in TradeLyser.
How to validate
- Validate Mark to Market (MTM) separately for index weeklies vs stock options.
- Stress-test with expiry-week and event-week subsets (RBI, budget, results).
- Confirm margin and tail-loss scenarios are logged for short premium books.
- Discard readings polluted by untagged discretionary adjustments.
How to track in TradeLyser
- Tag every leg: structure, DTE, moneyness, and whether Mark to Market (MTM) was a primary driver.
- Log planned max loss ₹ on entry for short premium strategies.
- Weekly: list open short ITM/ATM legs before expiry with a written roll/close rule.
- Separate F&O account tags from cash equity for Mark to Market (MTM) statistics.
Best practices
- Size Mark to Market (MTM) trades with margin headroom for gaps and assignment.
- Prefer defined-risk structures when learning a new options concept.
- Roll or close based on written DTE rules, not convenience.
- Keep weekly index and monthly stock books in separate tags.
Common pitfalls
- Short premium without defined max loss while Mark to Market (MTM) risk builds.
- Holding illiquid stock options into expiry without a plan.
- Blending index and stock gamma exposure in one tag.
- Ignoring margin spikes on gap opens.
How to use this in TradeLyser
Tag each session with end-of-day MTM and closed P&L in TradeLyser. Compare weeks where open MTM volatility was high versus rule-break frequency — many revenge trades follow large negative MTM days.
Reference guide
| Context | Value | Reading |
|---|---|---|
| Daily review | Log MTM and closed P&L separately | Treating open MTM swings as final day result before square-off |
| Risk limits | Daily loss cap includes MTM on open book | Adding size while MTM is already negative without plan |
Related terms
A futures contract obligates parties to transact the underlying at settlement per NSE rules, with daily mark-to-market and margin.
Index futures are standardized NSE F&O contracts on benchmark indices (notably Nifty 50 and Nifty Bank) that cash-settle against official closing prices. They offer leveraged exposure to broad market direction with transparent lot sizes and deep liquidity relative to most stock futures.
Margin call occurs when account equity falls below required margin — add funds or reduce positions.
Profit and loss (P&L) is the change in value from trading activity. Realised P&L locks at exit; unrealised P&L marks open positions to market.
SPAN (Standard Portfolio Analysis of Risk) margin is the minimum margin NSE clearing requires to hold a derivatives portfolio, computed from scenario-based risk across price and volatility moves. It replaces fixed-percentage margin with a portfolio-aware number that can shrink when you hedge and expand when exposure concentrates.
Square off is the act of closing an open trading position so net exposure returns to zero — selling what you bought or buying back what you sold short. On NSE, intraday MIS positions and many F&O exits are executed as square-off orders before session end or expiry.
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Sources & References
- ↗NSE equity derivatives — NSE (accessed 2025-06-01)
FAQ
Is MTM the same as realised P&L?
No. MTM is mark-to-market on open positions. Realised P&L is locked when you close or expire. Your journal should track both so open risk does not distort closed-trade analytics.
When does MTM matter most for Indian index traders?
On overnight futures holds, through expiry week on options, and any day with gap opens against your position. These are the sessions to log margin utilization alongside MTM.
Can MTM cause auto square-off?
Yes. If MTM losses erode available margin below broker/exchange requirements, the broker may square off positions — especially near market close on volatile days.
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