Futures are subject to a daily “mark-to-market” and cash settlement. The liquidation value for futures will always be zero in the margin calculation. Option contracts are not ”marked-to-market”, and the cash settlement is done when the contracts are expired. Options are also subjected to price movement risk.
Also asked, what is marked to market daily?
Mark to market (MTM) is a measure of the fair value of accounts that can change over time, such as assets and liabilities. Mark to market aims to provide a realistic appraisal of an institution's or company's current financial situation.
What is marked to market?
Mark-to-market (MTM or M2M) or fair value accounting refers to accounting for the "fair value" of an asset or liability based on the current market price, or for similar assets and liabilities, or based on another objectively assessed "fair" value.
Are forward contracts marked to market?
Forward contracts are very similar to futures contracts, except they are not exchange-traded, or defined on standardized assets. However, being traded over the counter (OTC), forward contracts specification can be customized and may include mark-to-market and daily margin calls.