Financial Education

Mark-to-Market (MTM)

Trading Term

Mark-to-Market (MTM) is an accounting method that records the value of assets and liabilities based on their current market prices, rather than their historical cost. This approach ensures that financial statements reflect the real-time value of holdings, providing a more accurate picture of an entity’s financial position.
In the context of trading, MTM is used to assess the daily profit or loss of open positions by comparing the current market price to the purchase price. This daily revaluation is crucial for margin accounts, as it determines the equity available and the potential need for additional margin.
IBKR employs MTM to update account balances daily, reflecting the current market value of positions.
Mark-to-Market (MTM) profit and loss shows the profit or loss incurred over a statement period for all positions, whether open or closed. The calculation is:
MTM P/L = Position MTM + Transaction MTM – Commissions
Where:
- Position MTM = (Current Closing Price – Prior Closing Price) x Prior Quantity x Multiplier
- Transaction MTM = (Current Closing Price – Trade Price) x Current Quantity x Multiplier
For Forex, MTM calculations also reflect the impact of exchange rate changes on non-base currency cash balances and products denominated in non-base currencies.

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