A losing proposition: Odds are against individuals in F&O trading

A vibrant F&O market enables better price discovery, and participants can hedge more efficiently. In aggregate, traders help generate the volumes, which ensure high liquidity and low spreads

A new study by the Securities and Exchange Board of India (Sebi), titled “Analysis of Profits & Losses in the Equity Derivatives Segment (FY22-FY24)”, suggests that trading in derivatives is a losing proposition. Brokerages and exchanges charge fees, which add to the transaction cost, and net of such costs, derivatives trading is a zero-sum game with every loss equating to commensurate gains for some counter-party. The study indicates 93 per cent of the over 10 million individuals who traded in derivatives (futures and options, or F&O) during the period under review incurred average losses of Rs 2