Futures contracts are 'settled' daily to minimize risk. This concept is called marking to market.
One of the defining features of the futures market is the concept of daily mark-to-market.
All futures markets have an official daily settlement price published by the exchange. During end of day processing, all open futures positions are ‘marked to market’ against the daily settlement price for the contract.
Profitable positions are credited with the difference between the contract price and the settlement price, while positions losing positions are debited the difference between the contract price and the settlement price.
This means no account losses are carried forward but must be addressed every day and is a key pillar of futures industry risk management. If positions are carried forward, the dollar difference from the previous day’s settlement price to today’s settlement price determines the profit or loss.
If a daily loss results in net equity falling below exchange-established margin levels the account will be required to provide additional financial resources to replenish the amount back to required levels or risk liquidation of the position. This is called a margin call.
Maintenance Margin is the amount a trader must post to their trading account after incurring losses after the daily mark-to-market calculation. If an account is in a margin call, the account must deposit enough funds to once again satisfy the initial margin requirement.