F&O trading Archives - Capitalworx

SEBI’s Study on F&O Trading: Key Lessons for Traders

The SEBI study on Futures and Options (F&O) trading reveals alarming statistics about retail traders in India. Over 93% of individual F&O traders lost money between FY 22 and FY 24, with average losses of ₹2 lakh per person. High transaction costs, complex options strategies, and the dominance of algorithmic trading by institutional players contribute to these poor outcomes. While futures trading saw some success, most traders still struggle in the options market. The study underscores the need for expertise, as casual participation in F&O trading often results in significant financial losses for individual traders.

The Rise and Risks of F&O Trading

The rise and risks of Futures and options (F&O) trading is driven by retail investors seeking quick profits and financial freedom. However, this growth raises significant concerns about the risks involved. Legendary investor Warren Buffett called derivatives “financial weapons of mass destruction,” and government officials echo these worries. With F&O trading volumes surpassing nominal GDP, regulatory bodies like SEBI are considering measures to curb excessive speculation. Social media further fuels this frenzy, creating an illusion of effortless wealth. As the market evolves, the need for education and mentorship becomes crucial to help novice traders navigate the complexities and mitigate risks effectively.