MTM, or Mark-to-Market, is a process in futures trading that values open positions based on their current market price at the end of each trading day. This means any unrealized gains or losses are reflected in your account balance daily, keeping track of your potential profit or loss on the contract.

Here’s an example of MTM in action with Nifty futures trading at 21500:

You buy 1 lot of Nifty futures contract on Day 1 at 21500.

Each Nifty futures contract represents a lot size of 50.

The contract value is calculated as contract price x lot size, making your initial contract value 21500 * 50 = 1,075,000.

Let’s say the position varies like this :

Day	Opening Price	Daily Change	Closing Price	Settlement Price	MTM Profit/Loss
1	21500	+100	21600	21600	+10,000
2	21600 (previous day’s settlement)	-50	21550	21550	-5,000
3	21550 (previous day’s settlement)	+75	21625	21625	+7,500
				ACTUAL PROFIT	+12500

• On Day 1, the Nifty futures rise to 21600, resulting in a +100 change and a closing price of 21600. This translates to a +10,000 MTM profit on your contract.
• On Day 2, the price fell to 21550, leading to a -5,000 MTM loss and a closing price of 21550. However, your account doesn’t actually lose money since the daily changes are credited/debited to your margin account for settlement.
• On Day 3, the price climbs again to 21625, generating a +7,500 MTM profit and a closing price of 21625.

Note: 

• MTM doesn’t affect your initial margin deposit, but it determines any additional margin calls.
• Unrealized MTM profits/losses don’t reflect actual cash flow until you square off your position.
• MTM helps maintain risk management in futures trading by ensuring positions reflect current market values.