Nearly 93% of individual traders incurred losses in F&O between FY22 and FY24: SEBI study

“During FY22-FY24, 1.13 crore unique individual traders (in F&O segment) incurred a combined net loss (i.e. trading loss inclusive of transaction costs) of Rs 1.81 lakh crore in F&O,” the SEBI study said.

In FY24 alone, individuals incurred about Rs 75,000 crore in net losses.

More than 1 crore loss-making traders (92.8 per cent of individual traders) lost, on an average, about Rs 2 lakh per person in the F&O over the period of three years.

Top 3.5 per cent of loss-makers, or approximately 4 lakh traders, faced an average loss of Rs 28 lakh per person in the three years, inclusive of transaction costs.

The study showed that just 7.2 per cent of individual F&O traders made a profit over the period of three years, and only one per cent managed to earn profits over Rs 1 lakh, after adjusting for transaction costs.

F&O are derivative instruments where traders buy an underlying asset (share) at a predetermined price. Trading in F&O has been a concern as many retail investors have lost their hard-earned money.

In July this year, SEBI, in a consultation paper, proposed a series of short-term measures to curb speculative trading in index derivatives, including restricting multiple option contract expires, raising the size of options contracts and intraday monitoring of position limits.

SEBI’s recent study said that almost half of all the F&O traders in FY24 (42 lakh traders) were “New Traders” (i.e. traders who traded for the first time in three years in the equity F&O segment). Around 92.1 per cent of these “New Traders” experienced losses and on an average. They incurred a net loss of about Rs 46,000 per person in FY24.

Despite consecutive years of losses, more than 75 per cent of loss-making traders continued trading in F&O.

As per the findings of the study, the proprietary traders earned about Rs 33,000 crore of gross profits (i.e. trading profits before accounting for transaction costs) in F&O segment in FY24, followed by FPIs who earned about Rs 28,000 crore in gross profits.

Against this, individuals and others incurred a loss of over Rs 61,000 crore in FY24 (before accounting for transaction costs).

“Majority of profits for FPIs and proprietary traders were made by “Algo entities”. Close to 97 per cent profits of FPIs and 96 per cent profits of proprietary traders came from Algo entities in FY24,” the study showed.

Algo entities are considered as those entities, who have done at least one trade in a year using algorithmic order.

The proportion of young traders (having age less than 30 years) trading in F&O has increased significantly from 31 per cent in FY23 to 43 per cent in FY24.

Close to 93 per cent of these young traders incurred losses in F&O in FY24, higher than the average loss makers of 91.1 per cent in FY24. Over 75 per cent of individual F&O traders (65.4 lakh traders) in FY24 had declared annual income of less than Rs 5 lakh.

The study showed that the proportion of ‘Female’ traders participating in F&O has decreased from 14.9 per cent in FY22 to 13.7 per cent in FY24. Compared to ‘Male’ traders, less proportion of ‘Female’ traders incurred losses.

While 91.9 per cent ‘Male’ traders made losses in F&O in FY24, 86.3 per cent percentage of ‘Female’ traders made losses in F&O.