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What is mark-to-market and when/how does it apply?

First, here are several definitions found on the WWW:

  1. An arrangement whereby the profits or losses on [a futures contract or various securities in your account] are settled each day.
  2. The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.
  3. Recording the price or value of a security, portfolio, or account on a daily basis, to calculate profits and losses or to confirm that margin requirements are being met.

The cost basis for each security in your portfolio is adjusted to its closing price each day. If you hold a security overnight, your true purchase basis goes away in lieu of the new "closing price" cost basis assigned to each security each day.

As an example: If you buy the security on Monday for $10/share and it closes at $11/share on Monday, Tuesday's cost basis is $11/share, and your account will see a PnL of $1/share for Monday. If the security ends Tuesday at $10.50/share then a -$0.50/share PnL is booked to your account for Tuesday and Wednesday's cost basis becomes $10.50/share.

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    Vicente Torres

    Is there any way to change that.
    This confuses the losses or gains of the real position.