91% Retail Traders Incur Loss In F&O

New Delhi: More than 91 per cent or 73 lakh individual traders lost money in the Futures & Option (F&O) segment in FY24 with an average net loss of Rs1.2 lakh per person, a study conducted by markets regulator Sebi revealed on Monday.

Further, 93 per cent of over 1 crore individual F&O traders incurred average losses of about Rs2 lakh per trader (inclusive of transaction costs) during the three years from FY22 to FY24. The aggregate losses of such traders exceeded Rs1.8 lakh crore during the period. In FY24 alone, individuals incurred about Rs75,000 crore in net losses, it added. The Sebi study found the top 3.5 per cent of loss makers -- about 4 lakh traders -- faced an average loss of Rs28 lakh per person over the same period, inclusive of transaction costs.

On the other hand, only 7.2 per cent of individual F&O traders made a profit over the period of three years and only 1 per cent of individual traders managed to earn profits exceeding Rs 1 lakh, after adjusting for transaction costs. Moreover, the number of retail traders, or individual traders, has almost doubled in two years to about 96 lakh in FY24 from about 51 lakh in FY22. Although such investors contributed about 30 per cent in the total turnover in FY24, they are a clear majority in number terms, as 99.8 per cent of total traders in the equity F&O segment are individuals.

“The availability of sophisticated trading platforms and lower transaction costs have enabled retail investors to actively trade in options and futures contracts, contributing to the surge in market liquidity,” Sebi said.

The regulator said rapid growth in F&O trading activity has highlighted the need for investor education and risk management practices, as a significant proportion of retail traders continued to incur losses in the market. This study follows up on a report published by Sebi in January 2023, which found that 89 per cent of individual equity F&O traders lost money in FY22. With increased participation of individual investors in equity and equity derivatives markets, the current study was undertaken to analyse profit and loss patterns for individual traders in F&O during FY22 to FY24, and for all the categories of investors in F&O during FY24 alone.

While individuals made losses in F&O, the FPIs and proprietary traders earned profits. The proprietary traders earned about Rs33,000 crore of gross profits in F&O segment in FY24, followed by FPIs who earned about Rs28,000 crore in gross profits. Against this, individuals and others incurred losses of over Rs61,000 crore in FY24 (before accounting for transaction costs).