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what is marked to market?

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This query is : Resolved

LATHA RAMESH (Querist)

31 January 2009 Dear Experts, please help me solve this problem :
"yesterday MR.X sold six months futures on BSE stock index of 3700. today the BSE sensex closed at 3860 and BSE stock index future closed at 3720. MR.X gets a call from his broker, who reminds him that his futures positition is marked to market each day. is the broker asking MR.X to pay the money or is he about to offer to pay MR.X"
Thank you.

Rajesh Kumar

Rajesh Kumar (Expert)

01 February 2009 Normally future positions are market to market- i.e. if the market falls, you have to give additional marging to cover your notional losses. So, say you brought 1000 units future at 100 Rs. At the time of buying, you have to give some margin. However, if the price falls to 95, you have to give additional marging of 5000/-, your notional losses.

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