Mark to Market (MTM) Calculator

Mark to market (MTM) is the accounting practice of valuing a position at its current market price rather than what you originally paid. The difference is your unrealized gain or loss. It is real in economic terms, but not yet taxable, because you have not sold.

The calculation:

Unrealized P&L = (Current Price x Shares) - Cost Basis

Cost basis is what you actually paid, so it includes the commission. That detail is what moves your break-even price above the purchase price: buy 500 shares at $40 with a $9.95 commission and you need $40.02 to get back to even, not $40.

If you bought 500 shares at $40 and they now trade at $55, your unrealized gain is $7,500 before commissions. If the price fell to $32, you are sitting on a $4,000 unrealized loss.

The term comes from futures markets, where the exchange marks open positions to market at the end of every trading day and settles the difference in cash immediately. That process is called daily settlement. If your futures position moves against you by $2,000 overnight, $2,000 is debited from your margin account that evening, regardless of whether you placed any new trade. This is what makes futures different from stocks: you can lose money on a position you never touched that day.

For equities and bonds, brokerages show MTM as an informational number. It becomes real only when you sell and realize the gain or loss.

Tax note: unrealized gains are generally not taxable in most jurisdictions until realized. Some exceptions exist for certain derivatives, wash-sale violations, and mark-to-market elections available to professional traders under IRS (Internal Revenue Service) Section 475.

Why the annualized number is the one to compare. Divide the unrealized P&L by the cost basis and you get the total return. That figure says nothing about speed. A 40% gain earned over eight years is about 4.3% a year, which most bond funds would beat. The same 40% in nine months is roughly 57% annualized. Enter the holding period below and the calculator does the conversion, using the standard compound form:

Annualized = (1 + total return)^(1 / years) - 1

One caution on short holds. Annualizing a three-week gain projects a lucky fortnight across a whole year, and the number that comes out is arithmetic rather than a forecast. Below about three months the calculator says so rather than quietly presenting it as a rate of return.