Nearly 88% of individual traders in India’s equity derivatives market lost money during FY26, according to a new study by the Securities and Exchange Board of India (SEBI). The regulator’s findings show that individual traders collectively suffered net losses of Rs 91,685 crore during the financial year, even as the number of active retail participants fell sharply.
The latest data highlights a mixed impact from SEBI’s tighter derivatives rules introduced in late 2024. Individual participation declined for the first time in about a decade, while aggregate losses fell 18% from the previous year. However, the average loss per individual trader increased to about Rs 1.17 lakh, showing that lower participation did not necessarily translate into lower financial damage for those who continued trading.
87.7% Of Individual F&O Traders Lost Money
SEBI’s profitability study found that 87.7% of individual traders incurred net losses in FY26, equivalent to roughly 88% of the retail trading population covered by the study. The loss-making share improved from 90.9% in FY25, but the proportion of traders losing money remained overwhelmingly high.
The results underline the difficulty individual investors face in consistently generating profits from leveraged derivatives trading, particularly in options.
Retail F&O Performance In FY26
| Metric | FY26 |
|---|---|
| Individual traders losing money | 87.7% |
| Individual traders making money | 12.3% |
| Aggregate net losses | Rs 91,685 crore |
| Average net loss per trader | Rs 1.17 lakh |
| Average loss among loss-makers | Rs 1.47 lakh |
| Average profit among profit-makers | Rs 1.22 lakh |
| Change in aggregate losses from FY25 | -18% |
The average loss among traders who lost money was about 21% higher than the average profit generated by traders who made money.
Retail Participation Falls 18%
The number of active individual traders in equity derivatives fell significantly during FY26.
According to SEBI’s accompanying trading-behaviour study, active individual traders declined from around 1.06 crore in FY25 to approximately 87.5 lakh in FY26, representing an 18% decline. This was the first annual decline in retail participation in the segment in roughly a decade.
The decline followed a series of measures introduced by SEBI to reduce excessive speculative activity in equity derivatives.
Individual F&O Participation
| Financial Year | Active Individual Traders |
|---|---|
| FY25 | 1.06 crore |
| FY26 | 87.5 lakh |
| Year-on-year change | -18% |
| Traders who exited in FY26 | ~46 lakh |
Reuters reported that 4.6 million traders who participated in FY25 did not return in FY26, compared with about 2.6 million exits in the previous year.
The decline suggests that SEBI’s regulatory measures, higher trading costs and changing market conditions may have discouraged some retail participants.
Aggregate Losses Fell, But Average Loss Increased
One of the most notable findings is the difference between total losses and losses per trader.
Individual traders’ aggregate net losses declined 18% to Rs 91,685 crore in FY26 from a revised Rs 1.12 lakh crore in FY25. However, because the number of active traders fell even more significantly, the average net loss per trader increased from roughly Rs 1.14 lakh to Rs 1.17 lakh.
F&O Loss Comparison
| Metric | FY25 | FY26 | Change |
|---|---|---|---|
| Aggregate net losses | Rs 1.12 lakh crore | Rs 91,685 crore | -18% |
| Average net loss per trader | Rs 1.14 lakh | Rs 1.17 lakh | +2.4% |
| Loss-making traders | 90.9% | 87.7% | Improved |
| Active individual traders | ~1.06 crore | ~87.5 lakh | -18% |
This means the overall loss pool became smaller largely because fewer people participated, rather than because the average participant became substantially more successful.
Options Account For 92% Of Retail Losses
Options remained the dominant part of individual derivatives activity.
SEBI found that options accounted for 92% of aggregate losses incurred by individual traders in FY26. In the broader profitability sample, 99.3% of individual traders traded options at least once, while 93% traded only options.
The behavioural study also found that about 97% of traders were predominantly options buyers.
Options Trading Among Individual Traders
| Indicator | FY26 Finding |
|---|---|
| Traders who traded options at least once | 99.3% |
| Traders who traded only options | 93% |
| Predominant options buyers | ~97% |
| Share of aggregate individual losses from options | 92% |
Options buying can provide access to leveraged market exposure with relatively small upfront premiums, but repeated premium losses can accumulate quickly when trades expire worthless.
SEBI’s findings show that this strategy was particularly widespread among individual traders.
Frequent Traders Accounted For Most Turnover
Trading activity was heavily concentrated among the most active participants.
SEBI found that traders who were active on more than 100 days represented about 42% of the behavioural sample but accounted for 94% of turnover and 87% of losses.
This concentration means a relatively small group of highly active traders generated a disproportionate share of market activity and losses.
Trading Intensity And Losses
| Trading Frequency | Share / Impact |
|---|---|
| Traders active >100 days | 42% |
| Share of turnover | 94% |
| Share of losses | 87% |
The findings also challenge the assumption that simply gaining more experience through repeated trading necessarily improves outcomes.
SEBI found that the share of loss-makers actually increased among traders who remained active over multiple years.
Experience Did Not Guarantee Better Returns
SEBI’s study found persistent losses among traders who continued participating in F&O markets year after year.
Among traders who were active in every year from FY22 through FY26, 65.6% lost money in all five years. Only 0.5% were profitable in every year.
Five-Year Trading Outcomes
| Outcome | Share Of Persistent Traders |
|---|---|
| Lost money in all five years | 65.6% |
| Profitable in every year | 0.5% |
| Lost money repeatedly | Majority |
The persistence of losses is one of the study’s most significant findings because it suggests that continuing to trade does not automatically provide enough experience to overcome the structural risks of derivatives.
SEBI also found that around 90-92% of traders who lost money in the previous two years lost money again in the following year.
Small Investors Carried A Large Share Of Losses
The regulator also found a major difference based on investors’ underlying equity holdings.
Traders with equity portfolios worth less than Rs 1 lakh accounted for 70% of aggregate losses over the two-year period examined in the profitability study.
This is particularly important because it suggests that traders with relatively small traditional investment portfolios can still take substantial exposure to derivatives.
Losses By Investor Size
| Investor Profile | Finding |
|---|---|
| Traders with equity portfolios below Rs 1 lakh | 70% of aggregate losses |
| Traders with peak margin below Rs 1 lakh | ~77% of behavioural sample |
| Traders deploying >Rs 1 lakh peak margin | 23% of sample |
| Higher-margin traders’ share of turnover | 92% |
| Higher-margin traders’ share of losses | 86% |
SEBI’s analysis found that 77% of traders in the behavioural sample deployed peak margin of less than Rs 1 lakh. However, the probability of losing money remained close to 90% for this group.
Derivatives Activity Often Exceeded Equity Holdings
SEBI also found that many individual traders were taking derivatives exposure that was substantially larger than their participation in the underlying cash market.
Around 18.6 lakh derivatives traders, or 24% of the wider behavioural sample, recorded no cash-market turnover. More than half had cash-market turnover below Rs 1 lakh.
The regulator also examined around 1.10 crore traders who had suffered derivatives losses between FY22 and FY24. By FY26, 77% of these traders held equity portfolios worth less than one-quarter of their earlier cumulative derivatives losses.
Cash Market Vs F&O Exposure
| Indicator | Finding |
|---|---|
| Derivatives traders with no cash-market turnover | 18.6 lakh |
| Share of behavioural sample | 24% |
| Traders with cash-market turnover below Rs 1 lakh | More than 50% |
| Loss-makers studied for later equity holdings | ~1.10 crore |
| Those whose FY26 equity holdings were below 25% of earlier F&O losses | 77% |
SEBI cautioned that this analysis does not capture assets such as bank deposits, property, debt investments or liabilities, so it should not be interpreted as a complete measure of traders’ overall wealth.
Transaction Costs Reached Nearly Rs 25,000 Crore
Retail traders also paid a significant amount in transaction costs while participating in the derivatives market.
SEBI’s study put total transaction costs incurred by individual traders at approximately Rs 24,859 crore during FY26.
Cost Of F&O Trading
| Metric | FY26 |
|---|---|
| Individual traders’ net losses | Rs 91,685 crore |
| Transaction costs | Rs 24,859 crore |
| Average loss per trader | Rs 1.17 lakh |
| Loss-making traders’ average loss | Rs 1.47 lakh |
Transaction costs include expenses associated with executing trades and can materially affect the outcome of high-frequency trading strategies.
For traders who make numerous short-term trades, even relatively small charges per transaction can accumulate into substantial costs over the course of a year.
Proprietary Traders And Foreign Investors Performed Better
The losses among individual traders contrast sharply with the performance of some professional market participants.
Reuters reported that proprietary traders generated around Rs 44,000 crore in gross trading profits in FY26, while foreign portfolio investors generated around Rs 14,000 crore. Algorithmic trading accounted for 99% of these gains, according to the report.
Professional Vs Individual Trading
| Participant | FY26 Outcome |
|---|---|
| Individual traders | Rs 91,685 crore net losses |
| Proprietary traders | ~Rs 44,000 crore gross profits |
| Foreign portfolio investors | ~Rs 14,000 crore gross profits |
| Algorithmic trading contribution to reported professional gains | 99% |
The comparison does not mean every institutional or professional trader made money. Rather, it demonstrates the significant difference in aggregate outcomes between individual traders and certain professional market participants.
Expiry-Day Trading Remains Highly Concentrated
SEBI’s data also shows that individual derivatives activity remains concentrated around contract expiries.
Around 59% of index-options turnover occurred on expiry days, while 75% took place on the expiry day or the day immediately before it, according to Reuters’ report on the SEBI study.
Expiry Concentration
| Trading Period | Share Of Index Options Turnover |
|---|---|
| On expiry day | 59% |
| Expiry day + previous day | 75% |
This concentration is important because options tend to experience rapid changes in value as expiration approaches, potentially increasing the risk associated with short-term speculative positions.
SEBI’s Measures Have Reduced Retail Participation
The latest results come after SEBI introduced a series of measures intended to curb excessive speculation in derivatives.
The regulator increased contract sizes, reduced the frequency of weekly index expiries, mandated upfront collection of option premiums, removed certain calendar-spread benefits on expiry days and introduced tighter monitoring of intraday position limits.
The decline in retail participation during FY26 suggests that these measures, alongside higher transaction costs and market conditions, have changed the behaviour of individual traders.
Major SEBI F&O Measures
| Measure | Objective |
|---|---|
| Larger contract sizes | Reduce excessive small-ticket speculation |
| Fewer weekly expiries | Reduce expiry-focused activity |
| Upfront option premium collection | Strengthen risk controls |
| Higher margin requirements | Limit excessive leverage |
| Intraday position monitoring | Improve market oversight |
| Expiry-day calendar spread changes | Reduce certain speculative strategies |
However, SEBI’s latest data indicates that reducing participation alone has not eliminated the underlying profitability problem.
The Bigger Picture
SEBI’s FY26 studies show that India’s retail F&O market has entered a different phase. Participation has fallen sharply, aggregate losses have declined and the share of traders losing money has improved from FY25. Yet almost nine in 10 individual traders still lost money, while the average loss per trader increased.
The findings also reveal how concentrated and persistent the problem remains. Options accounted for 92% of aggregate individual losses, highly active traders generated most of the turnover and losses, and nearly two-thirds of traders active across five consecutive years lost money every year. At the same time, individual traders paid nearly Rs 25,000 crore in transaction costs, adding another layer to the overall cost of participation.
Looking Ahead
SEBI is likely to continue evaluating whether its derivatives-market reforms are achieving the intended balance between investor protection and market participation. The FY26 data suggests that the measures have reduced the number of retail participants, but the profitability problem remains substantial among those who continue trading. Future regulatory attention could therefore focus not only on participation levels but also on trading frequency, expiry-day concentration, leverage, transaction costs and the persistence of losses.
For individual investors, the data reinforces the high-risk nature of F&O trading. The fact that only 0.5% of traders who remained active throughout FY22-FY26 were profitable in every year illustrates how difficult consistent profitability can be. The latest SEBI study does not say that every individual trader will lose money, but it provides strong evidence that sustained success in leveraged derivatives trading is uncommon and that frequent participation does not by itself improve outcomes.
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