Start with the number, because it is the whole story. SEBI found that 93% of individual traders incurred losses in equity futures and options between FY22 and FY24, with aggregate losses of more than ₹1.8 lakh crore over those three years. That is the regulator’s own study, published on 23 September 2024. Nothing on this page will change that arithmetic. If you still want to understand how these contracts work, here is the mechanism, honestly described.
What are futures and options, in plain terms?
A future is an agreement to buy or sell something at a fixed price on a fixed future date. Both sides are obliged. If the price moves against you, you pay, and there is no cap on how much.
An option is a right, not an obligation. The buyer pays a premium for it. A call gives the right to buy; a put gives the right to sell. The buyer’s maximum loss is the premium. The seller keeps the premium and carries the open-ended risk instead.
Both trade in lots, not in single shares. That is why the smallest sensible position is far larger than most beginners assume.
What are the terms you must understand before you trade?
| Term | What it means | Who carries the risk |
|---|---|---|
| Lot size | The fixed quantity in one contract, set by the exchange | You — it sets your minimum exposure |
| Margin | Money blocked by the broker to cover potential loss | You — it is topped up when the trade moves against you |
| Premium | What an option buyer pays the seller | The buyer loses it entirely if the option expires worthless |
| Expiry | The date the contract ends | Both — time value decays towards expiry |
| Mark to market | Daily settlement of gains and losses on futures | You — losses are debited the same day |
| Assignment | An option seller being made to honour the contract | The seller |
Margin is the term that surprises people. It is not the cost of the trade. It is a deposit, and a moving one. A broker can demand more mid-session and square off your position if it does not arrive.
Why do most retail F&O traders lose money?
Three reasons, and leverage is only the first. A small move in the underlying produces a large move in your account, in both directions. Most people size positions against the margin they can post rather than the loss they can absorb.
The second is time. An option loses value as expiry approaches, even when the underlying does not move. A buyer needs the move to be right in direction, in size and in timing. Two out of three is a loss.
The third is cost. Every trade carries brokerage, exchange charges, securities transaction tax, stamp duty and GST. We are not printing those rates here, because they change and they differ by broker and segment. Pull your own contract note after a week of trading and add them up. For high-frequency traders that total is often the difference between a small profit and a loss. Broker tariffs are compared on our broker reviews page.
What does SEBI actually publish about this?
More than most traders read. The September 2024 study covering FY22 to FY24 is the widely quoted one, and its headline figures appear at the top of this page.
SEBI released two further studies on 20 August 2026, under press release PR 50/2026: one on the profitability of individual traders in the equity derivatives segment for FY25 to FY26, and one on their trading behaviour. We have linked both below. We are not quoting figures from them here, because we could not retrieve the study text directly from SEBI’s site while writing this page, and second-hand numbers are not good enough for a page like this one.
SEBI also issued a caution to investors on 17 August 2026 about live trading strategies promoted on social media. That warning and the loss data belong together. Read our guide to phishing and investment scams before you pay anyone for tips.
If you still want to trade, what is the least reckless way?
Buy options rather than sell them, at least at first. The loss is capped at the premium, and a capped loss is the only real protection a beginner has.
Size every position by what you can lose, not by the margin available. Decide the exit before you enter, both the loss you will accept and the profit you will take. Keep a written log of every trade with the reason for it, then read it after a month. Most people stop at that point, which is the log doing its job.
And keep it separate from your actual finances. Money for a house deposit, a child’s fees or an emergency fund does not belong in a derivatives account. If a trade could damage a plan, the position is too big.
Frequently asked questions
How much money do I need to start trading F&O?
More than the marketing suggests. The minimum is set by the exchange lot size and the margin required for that contract, and both change. There is no fixed entry amount. Check the current margin requirement for the specific contract on your broker’s platform before assuming a figure, and remember margin can be called for again mid-trade.
Is F&O trading gambling?
These contracts exist for hedging, and for a business hedging a real exposure they are useful. For an individual with no underlying position, buying an option is a bet on direction and timing. SEBI’s own data — 93% of individual traders in loss over FY22 to FY24 — describes the outcome of that behaviour at scale.
How is F&O income taxed in India?
Gains from derivatives are generally treated as business income rather than capital gains, which changes how they are reported and what expenses can be set off. It also affects whether a tax audit applies. This is one area where a chartered accountant is worth the fee, because the reporting is easy to get wrong.
Can I lose more than I invest in options?
As a buyer, no. Your loss is limited to the premium paid. As a seller, yes, and this is the asymmetry beginners miss. Selling options produces a small, steady premium and an occasional very large loss. Many retail accounts are wiped out by a single such day.
What is expiry day trading?
Trading contracts on the day they expire, when time value collapses fastest and prices move violently. It is cheap to enter and it is where a large share of retail turnover sits. It is also the least forgiving environment in the market for someone learning.
Sources
- SEBI — “Updated SEBI Study Reveals 93% of Individual Traders Incurred Losses in Equity F&O between FY22 and FY24; Aggregate Losses Exceed ₹1.8 Lakh Crores Over Three Years”, 23 September 2024: sebi.gov.in
- SEBI — Study: Profitability of Individual Traders in the Equity Derivatives Segment (FY25–FY26), 20 August 2026: sebi.gov.in
- SEBI — Study: Trading Behaviour of Individual Traders in the Equity Derivatives Segment (FY25–FY26), 20 August 2026: sebi.gov.in
- Our methodology and editorial policy.
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