93% retail traders lost money in F&O in 3 years: Sebi study
When it comes to equity derivatives trading, retail investors are on the back foot, as 93 per cent of them incurred losses with average loss of around Rs 2 lakh per trader during the last three financial years (FY 22 to FY 24), according to a new study conducted by the Securities and Exchange Board of India (SEBI). There are over one crore individual (Futures & Options) traders. Despite consecutive years of losses, more than 75 per cent, of lossmaking traders continued trading in F&O.
The aggregate losses of individual traders exceeded Rs 1.8 lakh crore over the three-year period, the study pointed out.
The top 3.5 per cent of loss-makers — around 4 lakh traders — faced an average loss of Rs 28 lakh per person over the last three financial years. Only 1 per cent of individual traders managed to earn profits exceeding Rs 1 lakh, after adjusting for transaction costs.
Also, during the period, the proportion of young traders (below 30 years) in the F&O segment rose from 31 per cent in FY23 to 43 per cent in FY24. Individuals from Beyond Top 30 (B30) cities made up over 72 per cent of the total F&O trader base, a higher proportion compared to mutual fund investors, 62 per cent of whom are from B30 cities.
In contrast to individual traders, proprietary traders and Foreign Portfolio Investors (FPIs) as a class booked gross trading profits of Rs 33,000 crore and Rs 28,000 crore, respectively, in FY24 (before accounting for transaction costs). Against this, individuals and other investors incurred a loss of over Rs 61,000 crore in FY24, before accounting for transaction costs. Most of the profits were generated by larger entities that used trading algorithms, with 97 per cent of FPI profits and 96 per cent of proprietary trader profits coming from algorithmic trading.
F&O are financial derivatives that allow investors to trade on the price of underlying assets like commodities, stocks, bonds and currencies. The main difference between the two is that futures contracts require the buyer to purchase the asset, while options contracts give the buyer the option to buy or sell the asset.
