# Mark-to-Market > Mark-to-market means valuing positions at today's price and settling gains and losses daily. Learn how it works in futures accounts and why it matters for risk. Source: https://learn.tradelabsai.com/markets/mark-to-market/ Track: Markets and Instruments · Level: Beginner · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Mark-to-Market", https://learn.tradelabsai.com/markets/mark-to-market/ Mark-to-market means valuing a position at its current market price instead of at what you paid for it. In futures and many derivatives markets, it goes one step further: every day, gains and losses are actually paid. Cash moves into the accounts of traders whose positions gained and out of the accounts of those whose positions lost. This daily settlement is one of the main reasons futures markets rarely suffer defaults. ## How daily settlement works in futures At the end of each trading day, the exchange sets a **settlement price** for every contract. Each open position is revalued at that price, and the difference from the previous day's settlement is paid in cash. **Example: Three days in a crude oil future** You buy one crude oil contract (1,000 barrels) at $75.00. Each $1 move is worth $1,000. **Day 1:** settles at $76.20. Your account is credited $1,200. **Day 2:** settles at $74.80. Your account is debited $1,400. **Day 3:** you sell at $75.50. Day 3's move from $74.80 adds $700. Total: +$1,200 minus $1,400 plus $700 = +$500, exactly what ($75.50 minus $75.00) × 1,000 gives. Daily settlement does not change the final result; it changes when the cash moves. ## Why it exists Without daily settlement, a trader could build up a large unrealised loss over weeks and then be unable to pay. Mark-to-market caps how much can build up between payments to roughly one day's move. Together with margin requirements and a [[clearing-houses|clearing house]] that guarantees both sides, it makes exchange traded futures one of the safest structures in finance from a counterparty point of view. ## What it means for your account - **You need spare cash.** Losses are taken from your account each day. If your balance falls below the maintenance margin, you must add funds or reduce positions. See [Futures Margin: Initial and Maintenance](https://learn.tradelabsai.com/futures/futures-margin/). - **Gains are usable immediately.** Daily profits are credited as cash and can support other positions or be withdrawn. - **A winning trade can still trigger a margin call.** A position that ends profitable can dip deeply first; if your account cannot absorb the dip, you may be forced out before the recovery. **Watch out: Size for the path, not just the destination** Because losses are settled daily, your account has to survive the worst point along the way, not only the final outcome. Size positions so that a normal adverse move leaves a comfortable margin cushion. ## Mark-to-market beyond futures - **Brokerage accounts** show positions marked to the current price every day, even when no cash moves, so your account value reflects unrealised gains and losses. - **Margin accounts** use marked values to decide whether you meet maintenance requirements. See [Margin](https://learn.tradelabsai.com/markets/margin/). - **Funds** calculate a daily net asset value from marked prices. - **Banks and companies** use mark-to-market accounting for many financial assets, valuing them at fair market value. When markets are frozen and prices unreliable, this can produce large swings, as seen during the 2008 crisis. - **Taxes:** in the United States, many regulated futures contracts are marked to market at year end for tax purposes, and some traders can elect mark-to-market tax treatment. Rules are specific; see [Trading Taxes and Capital Gains](https://learn.tradelabsai.com/industry/trading-taxes-and-capital-gains/) and consult a tax professional. ## Settlement price vs last price The settlement price is not always the last traded price. Exchanges calculate it using rules such as a weighted average of trades in the final minutes of the session. This reduces the influence of a single odd trade at the close. If you check your account against the last price you saw, small differences are normal. ## Frequently asked questions ### What does marked to market mean? It means a position has been valued at its current market price. In futures, it also means gains and losses for the day have been settled in cash. ### Does mark-to-market change my profit or loss? No. The total result is the same as the difference between your entry and exit prices. It only changes when cash is paid in or out. ### Why did my futures account lose money when I have not closed my trade? Because futures are settled daily. Losses on open positions are deducted from your cash balance each evening, even before you close. ## Sources - Wikipedia, [Mark-to-market accounting](https://en.wikipedia.org/wiki/Mark-to-market_accounting) - Wikipedia, [Futures contract](https://en.wikipedia.org/wiki/Futures_contract) ## Continue learning - Next lesson: [Settlement](https://learn.tradelabsai.com/markets/settlement/) - Previous lesson: [Arbitrage](https://learn.tradelabsai.com/markets/arbitrage/) - Related: [Arbitrage](https://learn.tradelabsai.com/markets/arbitrage/): Arbitrage is profiting from price differences for the same thing in different places. Learn the main types, why opportunities vanish fast and the hidden risks. - Related: [What Is a Future?](https://learn.tradelabsai.com/markets/what-is-a-future/): A futures contract is an agreement to buy or sell something at a set price on a future date. Learn how futures work, margin, leverage, settlement and who uses them. - Related: [Futures Margin: Initial and Maintenance](https://learn.tradelabsai.com/futures/futures-margin/): Futures margin is a performance bond, not a loan. Learn initial and maintenance margin, day trading margin, margin calls, SPAN and how to avoid forced liquidation. - Related: [Margin](https://learn.tradelabsai.com/markets/margin/): Margin is the deposit you put up to borrow money or open leveraged positions. Learn initial and maintenance margin, margin calls, interest and how to avoid them. - Related: [Settlement](https://learn.tradelabsai.com/markets/settlement/): Settlement is when cash and securities actually change hands after a trade. Learn settlement cycles like T+1, cash vs physical settlement and how it affects you. - Related: [Clearing Houses and Central Counterparties](https://learn.tradelabsai.com/market-structure/clearing-houses/): Clearing houses stand between buyers and sellers so every trade is honoured. Learn how central counterparties work, margin, default funds and why they matter.