By the time you finish this article, nearly a thousand retail investors across India will have placed trades in Futures and Options (F&O), hoping to make quick profits. But chances are, over nine hundred of them just lost money.
Yes, you read that right. India has officially become the world’s largest derivatives market, not because our economy or market capitalisation overtook countries like the US or China, but because crores of Indians are trading in F&O contracts. What started as a tool meant for hedging and institutional strategies has become a battleground where retail traders, the majority with modest incomes, risk and lose lakhs of rupees in the hope of earning fast returns.
A recent study by the Securities Exchange Board of India exposed a harsh truth: 93 per cent of all individual traders in F&O lost ₹1.8 lakh crore from 2022 to FY2024.
The rise of a risky obsession
Futures and options are financial instruments that allow traders to bet on market movements without owning any stock. Because of their leverage, which means one can take large positions with relatively small amounts of money, they have become extremely popular among retail investors looking for quick cash. Platforms and influencers have glamorised F&O trading, often showcased wins and ignoring mounting losses. Sebi’s data tells a different story.
During the last three years, 1.13 crore unique individuals traded in F&O. On an average, each lost ₹ 2 Lakh after accounting for all costs. About 4 lakh traders are in the top loss bracket, losing ₹ 28 lakh per head.
The ₹50,000 crore cost of just showing up
This loss is even more brutal because nearly ₹50,000 crore went to transaction costs like brokerage, exchange fees, and taxes. Think of it this way: people are paying to lose more money. Sebi’s data revealed that the average retail trader spent ₹26,000 per year on these charges alone. Brokerage made up the lion’s share, followed by government taxes like STT and GST. It’s like running on a treadmill that charges you ₹1000 per kilometer, even though it takes you nowhere.
Who are these traders?
Surprisingly, or perhaps not, over 75 per cent of the F&O traders earned less than ₹5 lakh a year from their day jobs. These aren’t wealthy speculators. Many are salaried employees or small business owners trading part-time, chasing the ‘second income’ dream.
Worryingly, the fastest-growing group of traders is under the age of 30. In the financial year 2024 alone, 43 per cent of the traders were below 30 years of age, and 93 per cent lost money. That’s a generation getting financially burned before building serious wealth. Also, most of them don’t sit in the metros. The majority, 72 per cent of these traders, came from beyond the Top 30 (B30) cities, suggesting the F&O fever has gripped Tier-2 and Tier-3 India.
Meanwhile, the real winners were robots
While retail traders lost thousands of crores, proprietary trading firms and foreign portfolio investors (FPI) rake in profits, taking ₹33,000 crore and ₹28,000 crore in FY2024 alone.
What made the difference? Algorithms. Over 96 per cent of proprietary and 97 per cent of the FPI profits came from algorithmic trading, a style of lightning-fast, data-driven trades that the average Indian retail trader cannot match. Retail traders are playing blindfolded chess against supercomputers.
99 ways to lose money in F&O
An eye-opening case study by researchers of Chaitanya University uncovers the painful truth behind the Indian F&O mania: 90 per cent of retail traders lose money, often due to 99 common errors. Emotional traps like overconfidence, revenge trading and FOMO rule the day. Technical blunders like misusing leverage or misunderstanding option decay turn some trades into traps. The frenzy peaks on the expiration day, with 73 per cent of the index option trades placed at the last minute, which is more like gambling than investing. Many follow social tips blindly, ignoring strategy and risk management. The message is loud and clear: F&O is not a fast track to fortune. It’s a masterclass in what not to do.
Sebi steps in: 7-step plan to curb the frenzy
Sebi has stepped in with a clear plan to calm down the chaos in the F&O market. Too many people are trading without fully understanding the risks, treating it like a quick-money game.
To fix this, Sebi wants to make the system more responsible. It plans to reduce the number of strike prices, so traders don’t get confused with too many options that barely trade. Traders will now have to pay the full premium upfront, so no one can place trades without putting real money on the line. The extra margin benefit available on expiry day will be removed to stop people from placing risky bets at the last minute. All intraday trades will be tracked in real-time to catch dangerous positions early. Sebi also plans to raise the minimum lot size to discourage small, casual gamblers and reduce the number of weekly expiry contracts. The overall aim is simple: make F&O trading safer, smarter, and more meaningful.
Is this a warning or a wake-up call?
Retail investors have poured money, time, and hope into a product designed for professionals. Sebi’s findings show that F&O trading isn’t a harmless hobby; it’s often a shortcut to financial ruin. That doesn’t mean derivatives are evil. They are powerful tools. But they require skill, knowledge, discipline, and risk capacity.
For the average Indian investor earning ₹5 lakh a year, risking ₹2 lakh on leveraged trades isn’t bravery. It’s financial Russian roulette. It’s time to stop glorifying short-term wins and celebrate long-term, disciplined investments. In the real world, slow and steady not only wins but also survives the race.
The author is a co-founder of www.investaffairs.com