Over 90% of derivative traders lost money: Why you must avoid the trap of derivative trading

economictimes.indiatimes.com:

stock market, but eventually lose it all. They are then forced to flee or face jail time. I mentioned Shivraj Puri, who was first arrested in 2011 for scamming Citibank customers, in Gurugram, out of about Rs.400 crore while working as a relationship manager.

Puri was arrested, skipped bail, and was re-arrested six years later, eventually dying in jail a couple of years ago. While he was undoubtedly a scamster who robbed people, in a way, he was also a victim of what I believe to be the real scam in India. Though the source of his money was criminal, as an investor, he was just another casualty of the market.

Thirteen years ago, when this case first came to light, I had written this: “Citibank’s rogue relationship manager apparently blew up most of that money in the stock market.

Specifically, he seems to have been trading in the Nifty derivatives. I almost wish that he had instead run off with the money and was sunning himself on a beach in the Caribbean, wearing a false beard, with the money safely laundered into a Cayman Islands account. But … like (other) traders around the country, he found the lure of ‘effendo’ too strong.”

I know the whole story about how derivatives provide depth and breadth to the stock market, but for a vast majority of retail investors, this is not true.

Instead, as Warren Buffett pointed out, these are nothing but financial weapons of mass destruction. According to the Gurugram police, Puri purloined Rs.300 crore, leveraged it up to Rs.1,200 crore and then managed to shrink it down to Rs.175 crore when, in November, the Nifty refused to behave as he had expected it to. The only thing unique about his story is the scale, and the fact that he had stolen the money he was trading with.