Why most retail F&O accounts lose — the SEBI data

Every module in this part has argued, from the mechanics, that the retail options game is stacked against the person playing it: the buyer bleeds, the seller blows up, the expiry punter feeds a house edge, and no strategy conjures an advantage. Those are arguments from first principles. This module closes the part with something harder to wave away — a count.

Because in India, someone finally counted. The market regulator, SEBI, has access to every account and every trade, and it did what no marketing pitch ever does: it added up the profit and loss of all individual traders in equity derivatives, winners and losers together, and published the result. Not a survey. Not a sample. The whole population.

The finding is stark and consistent across its studies: the large majority of individual F&O traders lose money — on the order of nine in ten — and the losses are not small. This is the fact this module sits with. Not "it's risky." Not "be careful." A measured, whole-market result that the average individual who trades futures and options in India ends the year poorer for it.

The regulator's count is not a surprising accident; it is what the arithmetic predicts. Two forces guarantee it.

The first is that trading contracts is, before costs, a roughly zero-sum game. A futures or options contract is an agreement between two parties: for one to gain a rupee, the other must lose a rupee. Unlike owning a share of a growing business — where everyone can prosper as the company creates value over years — a derivatives contract creates no new wealth. It only transfers wealth from one side to the other. Add up all the traders' gains and losses against each other and, before any fees, they roughly cancel to zero.

The second force is cost, and it is what turns a fair-sounding zero-sum game into a losing one. Every single trade pays a stack of charges: brokerage, the Securities Transaction Tax, GST on the brokerage, exchange fees, stamp duty, regulatory charges. None is large on its own; together, on the vast turnover of Indian F&O, they are enormous, and they are subtracted from the traders' pool and paid to intermediaries. So the game is not zero-sum after all. It is negative-sum: the players as a group must end with less than they started, by exactly the amount the costs remove.

Put the two forces together and the regulator's finding is inevitable. In a negative-sum game, the average participant must lose, and the losses concentrate: a small number of sophisticated, well-capitalised players (often proprietary firms and algorithms on the other side of your trade) take the bulk of the gains, while the large majority of individuals share the losses and the costs. Nine in ten losing is not a mystery. It is what a negative-sum game does to the people who are not the house.

See why the count feels wrong even though it is right. illustrative

Open any trading forum or social feed and it looks like everyone is winning. Screenshots of five-figure profits, "₹40,000 in one expiry," confident threads about the trade that worked. If nine in ten lose, where are the nine? The answer is the whole reason the data is so surprising: the losers go quiet. A person who wins posts the screenshot; a person who loses says nothing, closes the app, and eventually the account. What you see is not the market — it is the market filtered by who chooses to speak, and only the survivors speak.

This is the silent graveyard — the statistician Abraham Wald's insight that the evidence you can see is systematically missing everyone the process removed. The blown-up accounts do not post their final balance. They are the graveyard, and it is silent by construction. So your felt sense of the odds — assembled from a feed of winners — is exactly inverted from the measured odds the regulator, who can see the graveyard, reports. Reading the feed and concluding "plenty of people win" is reading the survivors and missing the dead.

Now stand one honest individual inside the count. A trader starts the year with ₹2,00,000, trades index options actively, and finishes down ₹1,10,000 — more than half the account gone. Painful, but here is the part that stings: even his gross result, before costs, was a modest loss, and the costs — brokerage and Securities Transaction Tax on hundreds of trades — turned a bad year into a devastating one. He was not reckless by his own lights. He was simply the average participant in a negative-sum game, and the average participant, by arithmetic, ends where he ended.

Read honestly, the regulator's finding is powerful and bounded, and both matter.

What it does say is hard to escape: measured across every account, the large majority of individual F&O traders lose, the losses are large, and the structure — zero-sum before costs, negative-sum after — guarantees that this is the norm, not a run of bad luck. This is the house edge made visible at national scale: not a metaphor but a counted fact. It is the strongest possible answer to "but surely ordinary people make money at this" — someone checked, and mostly they do not.

What it cannot tell you is that winning is impossible or that every loser was foolish. A minority genuinely profit; some are skilled, some well-capitalised, some simply the firms on the other side of retail flow. Nor can the aggregate tell you your personal future with certainty — statistics describe populations, not individuals. But this is exactly where the trap springs: the room left by "a minority do win" is precisely the gap every losing trader climbed through, each certain they were the exception. The data cannot forbid you from trying; it can only tell you, with more authority than any other source, what usually happens to people who do — and "I'll be the exception" is the belief the number is built out of.

The right response is not despair but honesty about the base rate. Ruin is an absorbing state, and a negative-sum game played with leverage is a machine for reaching it: the costs grind you down in the calm, and the leverage finishes you in the storm. If, after all of this, you still choose to engage, the next part of this shelf is about the only honest way to do so — as a small, sized, defensible exception, never as a path to wealth.

The count is clear; the ways people talk themselves past it are predictable.

1. "I'll be the exception." The single most common thought, and the one the base rate already contains. The nine who lost thought it too; the number is what that thought looks like when everyone has it.

2. Reading the feed as the market. Winners post and losers vanish, so the visible sample is inverted from the real one. The graveyard is silent by construction, and its silence looks like proof that everyone wins.

3. Mistaking legal and popular for favourable. Heavy advertising marks who earns from your trading — the fee-collectors — not who wins it. Ubiquity is a business model, not your odds.

4. Confusing a live account with an edge. Being allowed to trade, and even winning for a while, is not evidence of beating a negative-sum game; some fraction of players must win early, and that fraction is the bait.

5. Treating "a minority win" as a door with your name on it. The room left by the exceptions is exactly where every loser walked in. A true statement about a few becomes a lie the moment you assume it is about you.