Daily mark-to-market is the process of valuing trading positions at current market prices at the end of each trading day. This practice ensures that profits and losses are recognized immediately rather than waiting until positions are closed. All futures and many derivative positions are marked-to-market daily, with gains and losses settled in cash through margin accounts.

This daily settlement process helps maintain market integrity by preventing the accumulation of large unrealised losses that could threaten the financial system. Mark-to-market requirements also provide transparency to traders and regulators about actual position values and risk exposure. The process can trigger margin calls if account equity falls below required levels.

Real-world example: A trader holding crude oil futures sees their position marked down by $2,000 at the daily settlement, requiring additional margin deposit to maintain the position overnight.