The one statistic worth knowing before you start

F&O — Futures and Options — is the derivatives segment of the Indian market: contracts whose value is derived from something else, usually a stock or an index, rather than being ownership of a business the way a share is.

It is also the most thoroughly measured corner of Indian retail investing, because SEBI — the Securities and Exchange Board of India, the market regulator — has gone and counted. Not surveyed. Counted, using actual client-level trading data from brokers.

Here is what five years of counting found:

Period Individual traders who lost money
FY22 (January 2023 study) 89%
FY22–FY24, lost money over the three years combined (23 September 2024 study) 93%
FY25 (20 August 2026 study) 90.9%
FY26 (20 August 2026 study) 87.7%

Over FY22–FY24, aggregate losses for individual traders exceeded ₹1,80,000 crore. In FY26 alone the figure was ₹91,685 crore, of which about 92% came from options rather than futures.

Read the second column again. This is not a bad year being reported. It is every period that has been measured, through a bull market and a correction, before and after a round of regulatory tightening designed to cool the segment down. SEBI’s own August 2026 study puts the single-year share at around 90% for four years running (FY22–FY25) before FY26’s dip to 87.7%. The number moves by a few points. It does not move by twenty.

Why this post exists

This blog has spent dozens of posts on how to value a business, read a chart, compare a fund, and calculate a tax. All of it assumes the thing you’re doing is investing: putting money into an asset and being paid by what that asset produces.

F&O is a different activity wearing similar clothes. A large share of the money individuals lose in the Indian market is lost here, and it is lost by people who arrived through the same apps, the same feeds, and often the same vocabulary as everyone else. A blog that taught RSI (the relative strength index) and never mentioned this would have been withholding the single most useful number in Indian retail finance.

The arithmetic underneath

The loss rate isn’t a mystery, and it isn’t mainly about people being stupid. Three structural facts do most of the work.

1. It is a zero-sum transfer before costs, and negative-sum after.

A share can make everyone who owns it richer, because the company underneath generates profit and pays it out or reinvests it. There’s a real economic engine producing returns.

A derivatives contract has no engine. Every rupee gained by one side is lost by the other, exactly:

Sum of all gains  +  Sum of all losses  =  0        (before costs)
Sum of all gains  +  Sum of all losses  = −(costs)  (after costs)

So the segment as a whole cannot make money. It can only move money between participants, minus what leaks out in brokerage, exchange fees, STT (Securities Transaction Tax), stamp duty and GST (Goods and Services Tax). SEBI puts the individual segment’s transaction costs at roughly ₹1,00,000 crore over FY22–FY26, nearly half of it brokerage. That is the house’s cut, and it is paid whether you win or lose.

2. The people on the other side are not like you.

The counterparty to a retail options trade is usually a proprietary desk or a foreign institutional investor running algorithms — SEBI’s earlier study found the overwhelming majority of those participants’ profits came from algorithmic trading. Faster execution, better pricing models, lower costs per trade, and no emotional stake in any single position.

3. Leverage compresses the time you have to be right.

This is the part that gets least appreciated, so it gets a worked example.

Worked example: what leverage actually does

Illustrative round numbers, not a real contract or a real price — the point is the structure, not the instrument.

Suppose an index sits at 24,000 and one lot is 75 units. Buying the underlying outright would cost:

24,000 × 75  =  ₹18,00,000

A futures contract on it might need roughly 12% of that as margin:

Margin  =  ₹18,00,000 × 12%  =  ₹2,16,000

Now move the index by 1%, which is an ordinary Tuesday:

Bought the underlying Bought one futures lot
Capital committed ₹18,00,000 ₹2,16,000
Index moves +1% +₹18,000 +₹18,000
Return on capital committed +1.0% +8.3%
Index moves −1% −₹18,000 −₹18,000
Return on capital committed −1.0% −8.3%

The rupee move is identical. The percentage return on your money is roughly eight times larger in both directions. That multiplier is the entire appeal, and it is also the entire problem: a 12% adverse move — which an index can deliver over a few weeks and a single stock over a single session — takes the margin to zero.

🧒 Explain it like I'm 10 (optional — skip if this is already clear)

Imagine two ways to bet on a cricket match.

The first: you buy a share of the team. If the team does well for years — wins matches, sells tickets, sells jerseys — you slowly get richer. Everybody who owns a piece of a good team can do well at the same time, because the team is actually making money.

The second: you and a friend bet ₹100 on today’s match. At the end of the day, one of you has ₹200 and the other has nothing. Nothing was made. The money just moved.

Now add two details. A bookie takes ₹5 from every bet, win or lose. And the person betting against you does this professionally, all day, with a computer that has watched a million matches.

You can still win a bet. You will find it very hard to keep winning bets.

What the data does not say

Being fair to the numbers matters more than being dramatic with them.

  • It does not say derivatives are useless. Futures and options exist for hedging, and they do that job well. A fund manager protecting a portfolio and an individual buying weekly options are doing unrelated things with the same instrument.
  • It does not say nobody makes money. Roughly one in eight individual traders was profitable in FY26. Some of them are genuinely skilled.
  • It does not tell you what to do. It tells you the base rate. What you do with a base rate is your business, and this blog is not registered to advise you on it.

What the data does say is that the honest prior, before any personal confidence enters the picture, is that this is an activity in which the large majority of participants lose, repeatedly, and that the segment’s profits go mostly to FPIs (foreign portfolio investors) and proprietary trading desks, not to individuals.

Common mistakes

  • Reading a losing year as a bad patch you wait out. Roughly nine in ten of those who lost in two consecutive years lost again, per SEBI’s August 2026 behaviour study. That’s only a little above the 87.7% of all traders who lost in FY26, so on its own it can’t separate skill from luck. What it does say is that losing doesn’t fix itself: the costs and the counterparty are still there next year.
  • Confusing a win rate with a profit. A trader — option sellers especially — can be right most of the time and still lose overall, because the few losses on the wrong days are bigger than the many small gains on the right ones. Buyers have their own version: right about the direction, but not soon enough to beat time decay. Count rupees, not trades.
  • Ignoring costs because each one is small. A ₹20 brokerage on a position held for two hours is a rounding error per trade and a very large number per year. Costs are the one part of the outcome that is certain in advance.
  • Assuming a small position is a small risk. Leverage means the position size and the money at risk are different numbers. That is the whole point of the table above.
  • Treating “I understand the strategy” as an edge. Understanding a strategy is table stakes. An edge means having something the counterparty doesn’t, and the counterparty is usually a machine.
  • Forgetting F&O is taxed differently. F&O gains and losses are generally treated as business income, not capital gains — so the holding-period rules in the Tax series and the ₹1.25 lakh exemption in the Tax series that this blog’s tax series covers do not apply to them. Different return form, different rules, sometimes an audit requirement (above the tax-audit turnover limits). That’s covered later in the tax series.

If you’re going to do it anyway

Not advice — just the things the data suggests you’d want to have settled before, rather than after:

  1. Decide the maximum you can lose entirely and treat it as spent, not invested. The base rate says that is the likely outcome.
  2. Write down the edge you think you have, in one sentence, before you start. If it comes out as “I think it’ll go up,” that isn’t an edge.
  3. Track rupees, not trades, including every cost. Most people’s memory of their own performance is a great deal kinder than their contract notes.
  4. Set a review date at which you compare the two honestly.

Takeaway: SEBI has measured every year from FY22 to FY26, and the answer barely moves: around nine in ten individual F&O traders lose money, around a lakh crore rupees a year lately. That isn’t bad luck; it’s what a zero-sum market minus costs does to the slowest, smallest, highest-cost participants. You can still choose to trade, but you can’t claim nobody told you the base rate.