Only 0.5% F&O traders make money: Why most keep losing; how to control losses and make trading safer
SEBI’s latest study does more than count losses in futures and options (F&O). It shows why ordinary traders keep losing money but continue trading.
Rachana Baid, professor and dean (academics) at the National Institute of Securities Markets, has suggested measures to reduce losses and improve safeguards for F&O traders.
More time in the market did not make these traders better. After one year, 91% of them lost money. After four years, the loss rate climbed to 96.5%. Only 0.5% of five-year traders made profits every year. Practice was not building skill in this part of the market. They treated each loss as a setback before the next big win.
Most traders, about 93%, bought options without selling them. A cheap option feels much like a lottery ticket. This appeal leads people to overestimate their chances of a large gain.
Around 90% of these options buyers lost money. Their median return on capital was =114% in FY26. Half lost more than the entire amount they had put to work.
Traders also tend to take credit for wins and blame luck for losses. The study cannot measure this thinking, but it explains the wider pattern.
Only 15.4% of all trader-quarters ended with a profit. The median quarterly profit was ₹4,366 while the median loss was ₹10,525. Traders accepted losses exceeding twice the profits they were willing to book.
Big winners and big losers both returned at 88%. Winners trusted their skill while losers wanted to recover their money. Among large past losers who continued, over 95% suffered another loss.
Broad warnings fail because each trader thinks those apply to somebody else. Brokers should show every customer their full trading record at login. This record should include profits, losses, charges, and returns since the account was opened.
New traders should face proper checks, not another consent screen. Beginners could receive lower trading limits until they gain experience. Brokers should offer yearly loss limits that customers select during onboarding. Raising those limits should require a cooling-off period.
Order screens should show premiums as a share of available capital. They should also show how many similar contracts expired without value.
Investor education
Investor education can turn mental accounting into a useful safety tool. People can split wealth into safety, long-term investment and high-risk opportunity buckets. Futures and options should be placed only in the small high-risk bucket. Its size must be fixed before trading starts. This approach gives speculation a clear budget instead of an open wallet.
According to Baid, SEBI should test these ideas through controlled trials before making new rules. Product rules have already covered expiries, contract sizes and transaction costs. The next challenge is changing trader behaviour, and this study provides a guide.
