What happens to the profit or loss due to daily settlement ?
In case the position is not closed the same day, the daily settlement would alter the cash flows depending on the settlement price fixed by the exchange every day. However the net total of all the flows every day would always be equal to the profit or loss calculated above. Profit or loss would only depend upon the opening and closing price of the position, irrespective of how the rates have moved in the intervening days. Lets take the illustration given in example 1 where a long position is opened at 4,800 and closed at 4,900 resulting in a profit of 100 points or Rs. 5,000. Lets assume that the position was closed on the fifth day from the day it was taken. Lets also assume three different series of closing settlement prices on these days and look at the resultant cash flows.
