Margin and daily mark-to-market

Margin is a deposit, not a price

When you buy or sell a future you do not pay the contract’s value. You deposit MARGIN — a fraction of it — as a guarantee that you can cover losses. The margin is not a fee: it is blocked while the position is open and released when you close it, after gains and losses are settled.

Who sets it

On Indian exchanges the clearing corporation sets the margin for each contract, using a risk model (SPAN) that estimates a bad one-day move, plus an extra extreme-loss margin. Brokers must collect at least that amount upfront — they may ask for more, never less (as of 3 November 2026).

Mark-to-market, every day

At the end of each trading day every open futures position is revalued at the day’s settlement price. If the price moved your way, the gain is credited to you in cash; if it moved against you, the loss is debited. This is MARK-TO-MARKET (MTM). Losses never pile up quietly until expiry — they are paid daily.

An illustrative week

Illustrative (not market data): you buy 1 USD/INR lot at 85.00. Day 1 settles at 84.90 — ₹100 is debited. Day 2 settles at 85.05 — ₹150 is credited. Day 3 you sell at 85.10 — ₹50 is credited. Total: +₹100 before charges, paid in three steps.

When the money runs short

If losses eat into your margin and you do not add funds when your broker asks, the broker will close (square off) positions to stop further loss. There is no “stop-out level” to aim at — the point is to never get near it. Size positions so that a bad week cannot force a square-off.

You’ve mastered: margin and MTM

Margin is a deposit, set at a minimum by the clearing corporation and collected upfront

Futures are marked to market daily: gains credited, losses debited in cash

Unmet margin calls lead to positions being squared off

Size so that a bad week cannot force you out