SEBI Study Reveals 91% of Individual F&O Traders Lost Money in FY25
A comprehensive study by the Securities and Exchange Board of India (SEBI) has revealed alarming statistics about individual trader performance in the futures and options (F&O) segment. The findings show that nearly 91% of individual traders incurred losses in F&O trading during fiscal year 2025, highlighting the challenging nature of derivatives trading for retail investors.
Massive Financial Losses for Individual Traders
The financial impact on individual traders was substantial and worsening. The study found that net losses of individual traders widened by 41% to Rs 1.06 lakh crore in FY25 from Rs 74,812 crore in FY24. This significant increase demonstrates the growing financial burden that F&O trading is placing on retail investors.
The scale of these losses represents a major concern for market regulators and underscores the risks associated with derivatives trading for individual investors who may lack the sophisticated risk management tools available to institutional players.
Declining Trader Participation
The study revealed a concerning trend in trader participation levels. The number of unique individual traders declined from around 61.4 lakh in the first quarter of FY25 to around 42.7 lakh in the last quarter of the fiscal year, representing a significant drop in retail participation.
Additionally, the total number of individual investors between December 2024 and May 2025 declined 20% year-on-year, though they remained 24% higher compared to two years ago. This suggests that while the immediate trend shows declining participation, the longer-term growth in retail trading remains evident.
Small Traders Hit Hardest
The study highlighted that traders with total turnover of less than Rs 1 lakh witnessed particularly high degrowth compared to the previous year. This finding suggests that smaller, less experienced traders are increasingly stepping away from F&O trading, possibly due to consistent losses and growing awareness of the risks involved.
The exodus of smaller traders indicates that the harsh realities of derivatives trading are becoming more apparent to retail investors with limited capital and experience.
Quarterly Loss Patterns
An interesting observation from the study was the quarterly pattern of losses. During the first three quarters of fiscal 2025, both the aggregate net loss across individual traders and the average net loss per person were rising consistently.
However, in the fourth quarter, there was a reduction in losses of individual traders – both at aggregate and per person levels. This improvement in the final quarter suggests that either market conditions became more favorable or traders adopted better risk management practices.
Market Activity Trends
The study revealed mixed trends in market activity levels. Index options turnover fell 9% in premium terms and 29% in notional terms compared to the previous year. However, when compared to two years ago, index options volume was up 14% in premium terms and 42% in notional terms.
The turnover of individuals in premium terms in the equity derivatives segment declined 11% year-on-year but rose 36% over the similar period two years ago, indicating the longer-term growth trend despite recent declines.
India's Dominance in Options Trading
The study emphasized that India continues to see very high trading in index options compared to global markets. This exceptional level of options trading activity has prompted SEBI to commit to continued monitoring of index options for investor safety and market stability.
During the past five years, within the equity derivatives segment, the options segment in premium terms grew at the fastest rate. Average daily premium traded grew at a CAGR of 72% for index options and 54% for single stock options, demonstrating the explosive growth in this segment.
Notional Turnover Growth
Similar impressive growth was observed in notional turnover, with index options turnover growing at a CAGR of 101% and stock options turnover growing at a CAGR of 61%. These extraordinary growth rates reflect the massive expansion in derivatives trading among Indian retail investors.
However, the study noted that within the equity derivatives segment, during the last six months, average daily premium traded for index options saw a degrowth of 9%, indicating a recent cooling in activity levels.
Regulatory Implications
The findings have significant implications for market regulation and investor protection. The high percentage of losing traders and the substantial financial losses suggest that many retail investors may be inadequately prepared for the complexities and risks of derivatives trading.
SEBI's commitment to continued monitoring indicates that further regulatory measures may be implemented to protect retail investors while maintaining market integrity and functionality.
Investor Education and Risk Awareness
The study's findings underscore the critical need for enhanced investor education and risk awareness programs. With 91% of individual traders losing money, there is clearly a significant gap between trader expectations and the reality of F&O trading performance.
These statistics serve as a stark reminder for potential F&O traders to thoroughly understand the risks involved and ensure they have adequate knowledge and risk management strategies before participating in derivatives markets.
The consistent pattern of losses across fiscal years suggests that the challenges facing individual traders in F&O markets are structural rather than temporary, requiring sustained efforts to improve investor education and risk awareness.
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