SEBI said that 9 out of 10 individual traders in Equity Futures and Options (F&O) have suffered losses. Market regulator SEBI has given this information in its latest analysis report.
SEBI reported that 93% of the F&O traders above Rs 1 crore have lost a total of Rs 1.8 lakh crore in the ten-year time period between financial year 2022 and financial year 2024. This means that out of approximately 93 lakh traders, one trader has incurred an average loss of around Rs 2 lakh (including transaction costs).
Investor participation in equity and equity derivative markets has increased.
- SEBI's latest report
said, 'Participation of individual investors in equity and equity derivative
market has increased. Hence, this study was conducted to analyze the profit and
loss pattern of individual traders in F&O for all categories during FY 2022
to FY 2024.'
Special points of SEBI study: -
- Only the top 3.5% i.e. approximately 4 lakh traders who are
in loss have incurred an average loss of Rs 28 lakh per person between
Financial Year 2022 and Financial Year 2024, which also includes transaction
costs.
- After adjusting for transaction costs, only 1% individual
traders are successful in making profits of more than Rs 1 lakh.
- Most of the profits were generated by large entities who
used trading algorithms. 97% of FPI profit and 96% of proprietary traders
profit came from algorithm trading.
- Most individual traders did not make money in the F&O
segment. They will spend an average of Rs 26000 per person in F&O
transaction cost in Financial Year 2024.
- In terms of age, the ratio of young traders (below 30 years)
in the F&O segment will increase from 31% in the financial year 2023 to 43%
in the financial year 2024.
- To talk about trading behavior and percentage, despite
losses for several years, more than 75% of the traders have continued trading
in F&O.
What is Futures and Options?
Futures and options are the major
types of stock derivatives trading in a share market. These are contracts
signed by two parties for trading a stock asset at a predetermined price on a
later date. Such contracts try to hedge market risks involved in stock market
trading by locking in the price beforehand.
Future and options in the share
market are contracts which derive their price from an underlying asset (known
as underlying), such as shares, stock market indices, commodities, ETFs,
and more. Futures and options basics provide individuals to reduce future risk
with their investment through pre-determined prices. However, since a direction
of price movements cannot be predicted, it can cause substantial profits or
losses if a market prediction is inaccurate. Typically, individuals well versed
with the operations of a stock market primarily participate in such trades.
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