It is mandatory for derivative positions to be settled in cash on a daily basis. At the end of each day, settlement of open derivative positions takes place at the exchange provided closing price. The difference between the opening price and the closing price is settled in cash (On the day of the transaction, the opening price is the acquisition price).
In the case of profit, the difference is added to the account of the investor and vice versa. In case of loss, the difference is deducted from the account. The subsequent day’s opening price is the previous trading day’s closing and the process repeats at the end of the day.