Options trading: Can retail traders actually make money in a zero-sum game?
money in the F&O segment in FY24. On average, these traders experienced net losses, including transaction costs, of around Rs 1.20 lakh per person in FY24.
SEBI’s study highlights several important findings that shed light on emerging trading patterns in India. Some of these observations challenge common misconceptions and provide much-needed reality checks.
The perception of F&O trading as a quick way to make money has been significantly undermined, with only a single-digit percentage of individual traders reporting net profits. This implies that the odds of winning are minimal in F&O trading. Moreover, the transaction charges associated with such trades are substantial, accounting for around 25% of the absolute P&L. While many traders tend to overlook transaction costs, their calculation based on the notional contract value plays a crucial role in determining exposure and trade payoffs, making it essential for traders to understand this implication.
The rise in young F&O traders is also a major concern from both social and national economic perspectives. These individuals are risking their capital at the early stages of their careers, and the report highlights that the proportion of loss-making traders is inversely proportional to age.
Further, the pursuit of quick wealth through F&O trading is more common among those in the low-income bracket (declared annual income below Rs. 5 lakh in FY24), who make up 76% of individual F&O traders. Alarmingly, over 90% of traders in this group incurred losses in FY22,
