Please explain this

#1
Interim Exercise Settlement for Options on Individual Securities

Interim exercise settlement for Option contracts on Individual Securities is effected for valid exercised option positions at in-the-money strike prices, at the close of the trading hours, on the day of exercise. Valid exercised option contracts are assigned to short positions in option contracts with the same series, on a random basis. The interim exercise settlement value is the difference between the strike price and the settlement price of the relevant option contract
---pls explain this para with an example.
suppose i short/sell a Andhrabank call-110 (25-01-2006) at 4 rupees when andhrabank's market price was 105. the next day andhrabank reached 120 and im assignedby NSE.whats my loss amount.
is it 120 -110 = 10 - 4(premium) = 6 rupees

OR
shall i have to pay the premium when andhrabank reached 120.

if it reached 120 ,its premium must be more than 120-110 =10 rupees

pls any one explain this.im totally confused.
 

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