MTM (Mark to Market) is a method for calculating gains/losses in futures, commonly used by derivatives exchanges: gains/losses are assessed for trading parties at the end of each day.
Generally speaking, the amount credited/debited under MTM equals to the difference between the closing price of the future at the end of the trading day and the closing price of the future on the previous trading day.
- On the day a transaction is made, the MTM equals to the difference between the transaction price and the closing price of the contract on the transaction day.
- At expiry, the MTM equals to the difference between the settlement price multiplied by the contract multiplier and the closing price of the contract on the last trading day.
Example:
- Client A purchased 10 futures at the price of NIS 35,000 from client B. At the end of the day, the closing price of the future was NIS 36,000. Hence, client A was credited NIS (36,000-35,000) * 10 futures and client B was debited the same amount.
- On the next day, the closing price of the future decreased to NIS 34,000. This time, client A was debited NIS 20,000 while client B was credited NIS 20,000
