A recent study by the Securities and Exchange Board of India (SEBI) has shed light on the significant financial losses incurred by individual traders in the equity derivatives market during fiscal year 2026. The findings indicate that a staggering 87.7% of individual traders faced net losses, collectively amounting to ₹91,685 crore.
Dominance of Options in Losses
The SEBI report highlighted that options trading was overwhelmingly responsible for these losses, accounting for 92% of the aggregate financial setbacks for individual traders in FY26. While 87.7% of options traders lost money, approximately 66% of futures traders also experienced losses, underscoring the higher risk profile of options.
Index options, in particular, saw a substantial decline in their trader base by 21% to 74.8 lakh in FY26. Despite this, aggregate losses in this segment remained high, though they decreased from ₹88,529 crore to ₹71,269 crore.
Short-Duration Options Amplify Risk
SEBI's data indicates a strong concentration of retail trading in very short-duration options. In FY25, 70% of Index Options turnover occurred on the expiry day (0DTE), with 98% within one week. Although regulatory measures introduced by SEBI led to a moderation in FY26, with 0DTE's share falling to 59%, 75% of turnover still happened within one day of expiry, illustrating a continued focus on high-risk, short-term contracts.
Average Losses Outpace Profits
A striking finding from the study is the disparity between average profits and losses. In FY26, the average loss for loss-making traders stood at ₹1.47 lakh, significantly higher than the average profit of ₹1.22 lakh recorded by profit-making traders. This means the average loss was about 21% greater than the average profit. Furthermore, losses were highly concentrated, with approximately 23% of traders responsible for nearly 90% of the total losses.
Transaction Costs Add to the Burden
Individual traders incurred substantial transaction costs, totaling around ₹24,800 crore in both FY25 and FY26. Despite a decrease in overall derivatives turnover, these costs remained stable due to higher Securities Transaction Tax (STT) offsetting reductions in brokerage and exchange charges. The average transaction cost per trader rose to ₹31,628 in FY26.
Transaction costs disproportionately affected loss-making traders, representing 35% of their gross losses, compared to 21% of gross profits for those who made money.
Smaller Portfolios and Younger Traders More Exposed
The study also revealed a strong correlation between portfolio size and the incidence of losses. Traders with equity portfolios below ₹1 lakh, who accounted for 51% of turnover, incurred 70% of total losses. Notably, traders with small portfolios (below ₹1 lakh) but high turnover (above ₹1 crore) represented 13% of traders but were responsible for 52% of aggregate losses.
Demographic analysis showed that younger traders were particularly vulnerable. Traders under 30 years old constituted 43% of all individual traders in FY26, with 89% of them losing money. This compares to 81% of traders over 60 who experienced losses. Similarly, individuals with an annual income below ₹5 lakh, comprising three-fourths of derivatives traders, accounted for 53% of aggregate losses, with 88% of this group being loss-makers.
SEBI's Regulatory Measures and Market Adaptation
SEBI implemented several measures in FY25 to curb speculation and enhance risk management, including:
- Restricting weekly derivative contracts to one index per exchange.
- Increasing minimum contract sizes.
- Requiring upfront collection of option premiums.
- Withdrawing calendar-spread benefits on expiry day.
- Imposing additional Extreme Loss Margin requirements on short options positions on expiry day.
These measures were followed by a significant decline in retail participation, particularly in index options. However, the market demonstrated adaptation, with average turnover per remaining index-options trader increasing by 12% and index-futures turnover per trader rising by 20%.