Mark price is used to calculate the market value and floating profit and loss(P&L) of your option positions, among other things.
The mark price is generally equal to the last traded price. However, in extreme market conditions, the last traded price may not fairly reflect the market value and floating P&L of your positions. This is when, for example, the last price deviates significantly from the bid and/or ask price, or there is no bid or ask price at all post to the last trade.
In such scenarios, the mark price will instead be set to be equal to the best bid, best ask, or the mid-price, as applicable, which provides a more realistic valuation of your current position and helps you better understand your floating P&L under the latest market conditions.
General Rules for determining the Mark Price:
When the last price lies between the best bid and best ask, the Mark Price is equal to the last price.
When the last price is not between the best bid and best ask or does not exist, the Mark Price is set to the mid-price (for single-leg option, mid-price generally equals to the average of the best bid and the best ask).
If the ask price does not exist and the last price is lower than the best bid, the Mark Price is set to the best bid.
If the ask price does not exist and the last price is higher than the best bid, the Mark Price is set to the last price.
If the bid price does not exist and the last price is lower than the best ask, the Mark Price is set to the last price.
If the bid price does not exist and the last price is higher than the best ask, the Mark Price is set to the best ask.