The market regulator’s requirement for a mandatory disclaimer stating that 9 out of 10 traders lose money in futures and options (F&O) on broker websites has not impacted derivative volumes, said industry insiders.
The Securities and Exchange Board of India (SEBI) has mandated that stockbrokers inform investors about the risks of trading in F&O on their websites, as well as each time a derivatives order is placed.
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As part of this, brokers are required to display a disclaimer on their websites stating that 9 out of 10 traders lose money in F&O.
As per a Sebi analysis in September, individual traders in the F&O market suffered a staggering Rs 1.8 lakh crore in aggregate losses over the past three fiscal years, with nearly 93 percent of more than 1 crore investors, or nine out of 10 traders, incurring average losses of Rs 2 lakh each.
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Only one percent of the individual traders managed to earn profits exceeding Rs 1 lakh, after adjusting for transaction costs.
Yet, despite this grim statistic, the allure of potentially striking it rich in one swift move keeps traders hooked, often leading to a vicious cycle of repeated losses.
One of the most intriguing aspects of this trend is who these traders are. SEBI's recent study shows that a large proportion of F&O participants come from smaller towns and modest financial backgrounds. A surprising 76 percent of traders earn less than Rs 5 lakh annually.
This assumes significance as an earlier study published in January 2023 by the capital market watchdog showed that 89 percent of individual equity F&O traders lost money in FY22.
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