Why is Marking to Market in Futures Important? Top 1 things to know – Trader’s Secrets

Last updated on April 11th, 2024 at 12:47 am

We are back with another article about trading. This time, we’ll dive into a term called Marking to Market in Futures. This term is related to everyday share price calculations and finally with the summary of all together.

As someone who works in the finance field, especially in the stock market, they must be aware about what Marking to Market in Futures is. It helps to understand how the market works and what are the total and final profit or loss made. 

Marking to Market in Futures is the main difference between Futures and Forwards.

Now, Allow me to explain you about Marking to Market in Futures –

Marking to Market

Marking to Market in Futures is a concept related to the daily profit and loss in shares that occurs due to market fluctuations. 

It’s a process in which the daily fluctuations in the share price are noted to record the current market situation instead of the book value. Marking to Market in Futures is done in order to make sure that margin is met. 

Mutual funds and stock price prices are marked daily to provide details to the investor daily. This is to make sure that the investors are aware about the Net Asset Value.

In summary, Marking to Market in Futures is recording the daily fluctuations of stock prices so the investors are aware about the Net Asset Value of their investments and they meet their margins.

ALSO READ : What is a Margin Call? Meaning, Definition and 3 Effective ways to cover a Margin call!

FAQs

Closing Statement

As a trader, you must know the meaning of this term. It’s the fundamental basis on which the trading process operates. 

I hope this article about Marking to Market in Futures helps you understand what is Marking to Market. If there are any questions or suggestions, mark it in the comment box