Retail options turnover now almost equals cash segment, shows data

The retail turnover in the high-risk options segment is now almost equal to that in the cash segment. In FY19, it was less than 10 per cent of the cash segment. 

Meanwhile, the active monthly retail users in the options segment jumped eight-fold to 3.9 million, while that in the cash segment have risen nearly 4x to 11 million, according to an analysis by Kotak Institutional Equities (KIE).

A study released by capital markets regulator Securities and Exchange Board of India (Sebi) this week said that almost three-fourth of individual traders end up in losses.

A similar study released last year showed only 1 of the 10 options traders manage to make money.

Despite this, the number of individual investors taking up trading in the cash as well as in the derivatives segment has grown exponentially.

“Retail participation in options has grown faster than their participation in cash. Adjusting for delivery trades, retail option volumes are nearly equal to intraday cash as compared with 10 per cent in FY2019,” said the KIE note.

However, the contribution of small traders — those clocking turnover of less than Rs 5 lakh — still remains only a miniscule 1 per cent to the total cash segment turnover. 

Against this backdrop, Sebi has set up a working group to review derivatives trading norms with an aim of enhancing investor protection and risk management. The committee is expected to submit its recommendations soon.