SEBI study: 90% of retail F&O traders lose money
In January 2023 (covering FY22 data) and again in 2024 (covering FY23-24 data), SEBI published studies on retail participation in the equity derivatives (F&O ) segment. The headline finding: approximately 90% of individual traders incurred net losses over the study period. The findings prompted a series of regulatory tightening measures across 2024-25.
The studies
| Study | Period | Source |
|---|---|---|
| First study | FY22 (April 2021 to March 2022) | SEBI study released January 2023 |
| Second study | FY23-FY24 | Released July 2024 |
Both studies analysed actual trade data from a large sample of retail trader accounts, computing realised P&L net of brokerage and other charges.
Headline findings
| Finding | First study (FY22) | Second study (FY23-24) |
|---|---|---|
| Percent of traders with net losses | ~89% | ~93% |
| Average annual loss per loss-making trader | ~Rs 50,000 | ~Rs 1,20,000 |
| Total retail loss aggregate | Rs ~45,000 crore | Rs ~75,000 crore |
| Median trader experience | Less than 3 years | Less than 3 years |
The exact percentages vary slightly between studies, but the broad message is consistent: most retail F&O traders are net loss-makers.
Key drivers of losses
The studies identified several factors driving the loss pattern:
1. Excessive brokerage and STT
For each F&O trade, retail pays:
- Brokerage (Rs 20 per leg at Zerodha; higher at full-service brokers).
- Securities Transaction Tax (STT) on the sell leg.
- Exchange transaction charge.
- GST, stamp duty, SEBI fee.
For a high-frequency intraday or short-cycle trader, these charges accumulate to 5-15% of gross trade value over the year. The trader must outperform this hurdle just to break even.
2. Overtrading
The studies showed that loss-making traders tended to trade much more frequently than winners. Frequent trades increase charge burden and trade-decision errors.
3. Selling options without hedge
Many retail traders sold options without proper hedges, generating premium income that worked until a tail event wiped out months of accumulated premium. The asymmetry of option selling without protection is a structural loss generator over time.
4. Leveraging mid / small-cap stock options
Stock option contracts on illiquid mid / small-caps have:
- Wide bid-ask spreads.
- Pre-expiry physical settlement margin spikes.
- High implied volatility making time decay both faster (theta) and riskier (vega).
Trading these without sophisticated understanding led to concentrated losses.
5. Following social-media calls
Retail flow concentrated in trades hyped by finfluencers and tip-giver accounts on Telegram and YouTube. Many of these calls had no rigour; following them caused systematic losses.
Policy response: F&O entry barriers
In response to the studies, SEBI tightened F&O participation rules:
- F&O entry barrier rules : introduced income / experience criteria.
- Weekly expiry contraction : from 5 weekly expiries to 1 per exchange.
- STT hike on F&O : increased to make F&O speculation more expensive.
- Lot size revision : minimum contract sizes increased.
- True-to-label charges : clarified charge structures.
Together these measures aimed to reduce retail F&O participation, particularly the high-frequency, low-conviction trading that dominated retail loss.
Industry reaction
Brokers (especially Zerodha ) supported many of the policy directions:
- Acknowledged the loss concentration.
- Pushed back against the more restrictive measures (suggesting these would harm legitimate traders).
- Implemented additional retail risk disclosures.
The intra-industry debate continues: how much paternalism is appropriate?
What the studies mean for retail traders
If you trade F&O
- Track your P&L carefully, including all charges.
- Recognise the structural odds. The data says 90% lose; what makes you different?
- Diversify away from F&O concentration.
- Avoid following unverified calls.
If you don’t trade F&O yet
- The studies suggest extreme caution before starting.
- Build a track record in equity delivery first.
- Understand options theory before selling premium.
- Consider whether the time spent on F&O is value-positive.
For complex tax situations
F&O P&L is taxed as business income (specifically speculative for intraday equity, non-speculative for F&O). Tax-audit requirements apply above certain turnover thresholds. For complex tax situations or large F&O turnover, consult a Chartered Accountant before filing.
See also
- SEBI F&O entry barrier rules 2024
- Weekly expiry contraction November 2024
- STT hike on F&O October 2024
- Lot size revision F&O 2024
- SEBI true-to-label charges October 2024
- SEBI broker risk disclosure norms
- SEBI RA vs IA distinction
- Finfluencer SEBI ban impact on Zerodha referrals
- SEBI peak margin rules explained
- Upfront margin requirements post-2020
- 50:50 cash collateral rule explained
- Direct payout to demat SEBI rule
- Margin trading SEBI new rules 2026
- Instant settlement T+0 stocks list
- Settlement cycle changes 2025-26
- SPAN and exposure margin on Kite
- Margin available / used / cash on Kite funds
- Margin required on order window
- Margin on exit calculation
- Option premium credit on Kite funds
- Kite Positions tab explained
- Futures and options
- Securities Transaction Tax
- Speculative business income (India)
- How to add F&O contracts to the marketwatch
- How to add Nifty / BankNifty options to the marketwatch
- SEBI
- Zerodha
External references
- SEBI study on retail derivatives losses, January 2023
- SEBI study July 2024 update
- NSE F&O segment
- Zerodha policy statements on F&O retail participation
References
- SEBI, Study on profits and losses in the F&O segment, January 2023.
- SEBI, Updated study on retail F&O participation, July 2024.
- NSE India, Retail derivative participation trends, nseindia.com.
- Zerodha policy comments, F&O retail data, zerodha.com.