F&O losses hit young traders hardest: 89% of investors under 30 lost money in FY26, most were from low-income groups

Young investors are increasingly entering the futures and options (F&O) market, but most of them are struggling to make any profits, according to a recent study by Securities and Exchange Board of India (Sebi).

Traders below the age of 30 now account for 43% of all individual traders in FY 2025-26, up sharply from 31% in FY22, highlighting their domination in terms of participation in the highly volatile equity derivatives segment.

However, this growing participation has also come with a higher incidence of losses. About 89% of traders below 30 incurred losses in FY26, compared with 81% of traders above 60, making the youngest cohort with the highest proportion of loss-making traders.

Most of these traders are from low-income groups

Trading activity data shared by the markets regular also showed that low-income traders have majorly remained active in the derivatives market, trading an intensity of 75 times their portfolio value.

About three-fourths of individual derivatives traders have an annual income below ₹5 lakh. In the previous financial year, this section accounted for 43% of turnover but 53% of aggregate losses, a share of losses ten percentage points higher than their share of trading activity.

The share of loss-makers was highest among traders earning less than ₹10 lakh a year, particularly in the lower and medium capital-employed categories, where close to 90% traders incurred losses.

Aggregate losses fell, but average loss per trader rose

Individual traders’ aggregate net losses from stock market trading declined about 18%, from ₹1,11,788 crore in FY25 to ₹91,685 crore in FY26. This was the first annual decline in aggregate losses between FY22 and FY26.

However, the overall picture remained concerning. Individual traders accumulated nearly ₹3.85 lakh crore in net losses over the five-year period.

Moreover, the average loss per trader increased from around ₹1.14 lakh in FY25 to ₹1.17 lakh in FY26, suggesting that even though the total losses declined, those who lost money continued to take a significant financial hit.

F&O trading drives losses among individual traders

The biggest takeaway from the study is the dominant role of equity derivatives trading in causing retail losses. Options continued to drive the majority of losses among individual traders in FY26, accounting for 92% of their aggregate losses.

“The high incidence of retail losses observed in India is consistent with global evidence, with around two-thirds to nine in ten retail participants in several derivatives and leveraged-product markets incurring losses,” the study noted.

The proportion of loss-makers were far higher among options traders than future traders. About 87.7% of individual options traders lost money, compared with around 66% of futures traders.

Derivatives trading activity is not longer limited to top-30 cities of the country, which include New Delhi, Mumbai, Bengaluru, Chennai, Kolkata, Pune, Hyderabad, Ahmedabad among others.

Beyond these cities, investors made up about two-thirds of individual traders and nearly half of derivatives turnover in FY26, even though this segment accounts for only about one-fourth of individual mutual fund assets, pointing to markedly higher derivatives risk appetite relative to their broader investment behaviour.

Why are options such a risky investment?

The data showed that retail trading in index options remains heavily concentrated in very short-duration options.

In FY25, 70% of turnover occurred on the expiry day itself (‘0DTE’), 80% within one day of expiry (‘1DTE’), and 98% within one week of expiry (‘7DTE’).

Following the introduction of measures by Sebi, these proportions moderated to 59%, 75% and 97%, respectively, in FY26, indicating a modest shift away from very near-expiry contracts.

Longer-dated contracts accounted for only a negligible share of trading, with just 3% of turnover occurring in contracts having more than seven days to expiry, and only 1% in contracts with more than ten days to expiry.

The data suggest that even though expiry-day concentration moderated after the measures, retail activity remained overwhelmingly focused on contracts with very short time to maturity.