Daily settlement

With a stock, a loss is just a number on the screen until you sell. Futures are different. Every single trading day, gains and losses on open positions are actually paid and collected. This is called daily settlement, or mark-to-market, and it is one of the features that makes the futures system work.

The settlement price

At the end of each trading day, the exchange sets one official daily settlement price for every contract. The exchange publishes how it calculates that price for each product, and the result is the same for everyone. Every open position in that contract is valued at that one price.

Marking to market

“Marking to market” means revaluing your open position at the day’s settlement price and moving the money. The CFTC requires customer accounts to be adjusted every trading day to reflect the current market value at the close.

Here is how it works:

• The profit or loss for the day is the difference between yesterday’s settlement price and today’s settlement price (or, on the day you open a position, between your entry price and that day’s settlement).
• If your position gained, cash is added to your account that day.
• If your position lost, cash is taken out of your account that day.

CME puts it simply: in the futures markets, losers pay winners every day. No loss is carried forward to deal with “later.”

A worked example

You buy 1 MNQ and hold it for three days. All prices are made up for the example. MNQ is $2 per point.

Add it up: +$40, -$60, +$30 = +$10. Check it the simple way: you bought at 20,000.00 and sold at 20,005.00, a 5-point gain, times $2 = $10. Same answer. Daily settlement does not change your total result. It just pays it out one day at a time.

Why it matters to you

Your account balance is real every day. On Day 2 in the example, $60 actually left your account, even though you had not closed the trade.

It connects to margin. If a day’s loss pulls your account below maintenance margin (Lesson 8), you may get a margin call or have your position closed. Daily settlement is how that check happens.

It protects the system. Because losses are collected every day, they cannot pile up quietly until someone is unable to pay. This is a big part of how the clearing house (Lesson 3) is able to guarantee every trade.

If you only day trade

If you open and close every trade within the same session, your profit or loss is simply your entry price versus your exit price. Mark-to-market matters most when you hold a position from one trading day into the next.

Key ideas

• The exchange sets one official settlement price per contract each day, the same for everyone.
• Mark-to-market means open positions are revalued at that price and gains and losses are paid in cash daily.
• In futures, losers pay winners every day. Nothing is carried forward.
• Daily settlement is how margin calls are triggered and how the clearing house stays safe.