Why 9 in 10 F&O Traders Lose Money: What SEBI’s FY26 Study Means for Beginners
Every week, someone walks into our Dadar branch with the same story. They opened a demat account, watched a few videos, started buying options with a small amount, and within a few months the account was half empty.
If that sounds familiar, you are not alone. The market regulator’s own data proves it.
In August 2026, SEBI released a study titled “Profitability of Individual Traders in the Equity Derivatives Segment (FY25–FY26)”. The findings are a wake-up call for every new trader in India, and an important read for anyone planning to join a stock market course in Mumbai.
In this article, we explain what the SEBI F&O loss study found, why most F&O traders lose money, and what a beginner should do differently.
SEBI’s FY26 F&O Study: Key Numbers at a Glance
| What SEBI measured | FY26 result |
|---|---|
| Individual traders who made net losses | 87.7% |
| Total net losses of individual traders | ₹91,685 crore |
| Share of losses that came from options | 92% |
| Loss rate among traders under 30 | 91.9% |
| Active individual F&O traders | Down from 98.1 lakh to 78.6 lakh |
SEBI reported that 87.7% of individual traders incurred net losses in FY26, and aggregate net losses were ₹91,685 crore, with options accounting for 92% of losses. Traders under the age of 30 form the largest group of participants, and this cohort faced a 91.9% loss rate during the year.
What the SEBI F&O Loss Study Actually Found
At first glance, FY26 looks like an improvement. The loss rate improved versus FY25, when SEBI reported 90.9% of individual traders made net losses. Total losses also came down.
But look closer and the picture is less comforting.
Losses fell mainly because fewer people traded. The number of active individual equity derivatives traders fell from 98.1 lakh in FY25 to 78.6 lakh in FY26, a decline of approximately 20 per cent. The headline improvement, therefore, came primarily from reduced participation rather than a decisive improvement in retail profitability.
Small traders suffered the most. Traders with equity portfolios below ₹1 lakh accounted for about 70% of aggregate losses, and 93% of traders with no equity holding made losses.
Losing traders keep coming back. SEBI found that among traders who lost money for two consecutive years and continued trading, approximately 90 per cent lost again in the following year. openthemagazine
Trading more meant losing more. Greater trading intensity was linked to greater losses.
This is not a one-year problem. In FY25, 91% of individual retail F&O traders lost money, with net retail losses crossing ₹1.05 lakh crore. Across FY22 to FY24, the aggregate losses of individual traders exceeded 1.8 lakh crore rupees. multibaggnewsonair
Why Do So Many F&O Traders Lose Money?
The problem is not that the F&O market is “rigged.” It comes down to how most retail traders use these products. Here are the six biggest reasons we see in our classrooms.
1. Buying cheap options without understanding time decay
Most beginners start with option buying because the premium looks small and the profit potential looks huge. What they don’t understand is time decay (Theta). An option loses value every day, even if the market doesn’t move against you. Retail participation was overwhelmingly concentrated in option buying. That explains why options caused almost all the losses. multibagg
2. Trading on expiry day
Expiry-day options are cheap for a reason. Prices swing wildly within minutes, and most of these contracts expire worthless. Many new traders treat expiry day like a lottery ticket and lose money on it again and again.
3. Overtrading
Taking 10 to 20 trades a day feels productive, but every trade carries brokerage, taxes, and exchange charges. SEBI’s data confirms that the more intensely people traded, the more they lost.
4. Trading without position sizing or a stop loss
Putting a large part of your capital into a single trade, or holding a losing position “hoping it will come back,” is the fastest way to wipe out an account. Professional traders decide how much they are willing to lose before they enter a trade.
5. Competing against algorithms
When you trade F&O, the person on the other side is often a large institution with advanced technology. SEBI also found that 99% of the profits generated by FPIs and proprietary traders came from algorithmic entities, highlighting the technological advantage available to sophisticated market participants. A retail trader acting on tips or gut feeling is at a serious disadvantage.
6. Starting F&O before learning the basics
Many traders jump straight into derivatives without understanding the cash market, chart reading, or how futures and options are priced. The 93% loss rate among traders with no equity holdings shows what happens when people skip the foundation.
Why Experience Alone Doesn’t Fix the Problem
Many traders believe that if they keep trading long enough, they will eventually “figure it out.” SEBI’s data says otherwise. One of the more striking findings from the Sebi study is that experience did not meaningfully improve outcomes.
Repeating the same mistakes for three years doesn’t give you three years of experience. It gives you one bad year, three times over. Improvement comes from structured learning, a tested process, and honest review of your trades, not just screen time.
What This Means If You Are a Beginner
Does this mean you should never trade futures and options? Not necessarily. The SEBI studies do not say that every individual must avoid derivatives or that no retail trader can earn a profit.
It does mean that F&O should come last in your learning journey, not first. Before placing your first options trade, ask yourself:
- Do I understand how option premiums are priced, including time decay and volatility?
- Have I traded in the cash market and learned to read charts?
- Do I have a written trading plan with a fixed risk per trade?
- Am I trading with money I can genuinely afford to lose?
- Have I practised with paper trading before risking real money?
If the answer to any of these is “no,” you are not ready for F&O yet. That’s completely fine.
A Risk-First Learning Path for New Traders
Here is the order we recommend to every student at Upside:
- Learn the market basics. Understand how NSE and BSE work, what SEBI does, and how orders, demat accounts, and settlement work. Our Diploma in Stock Market (DSM) covers this in depth.
- Learn to read charts. Candlestick patterns, support and resistance, trends and indicators. Our Technical Analysis Course is built for this.
- Practise risk management. Position sizing, stop losses, and a trading journal. This is part of our Intraday & Swing Trading Course, where students paper trade before using real money.
- Only then, learn F&O. Once your foundation is solid, the Upside Option and Future Certification Course teaches option pricing, Greeks, hedging, and why option selling and option buying carry very different risks.
- Go for certification. If you want a career in the market, our NISM Exam Preparation Course prepares you for industry-recognised certifications.
For those who want complete, career-focused training, the Advance Diploma in Stock Market (ADSM) combines all of these stages in one structured 7-month program.
How Upside Teaches F&O Differently
At Upside Stock Market Training Institute, we don’t sell dreams of quick profits. SEBI’s data shows exactly where that mindset leads. Our share market classes focus on three things:
- Process before profit. Students build their own trading setup and follow written rules.
- Risk before reward. Every strategy is taught with its worst-case scenario, not just its best case.
- Practice before real money. Live-market practice sessions and paper trading come first.
Our classroom batches run at our Dadar head branch, our Thane branch and our Vasai branch, with online options for those who can’t attend in person. Learn more about our share market classes in Mumbai.
Frequently Asked Questions
What percentage of F&O traders lose money in India?
According to SEBI’s study covering FY25 and FY26, 87.7% of individual traders in the equity derivatives segment made net losses in FY26. In FY25, the figure was about 91%.
Why do most option buyers lose money?
Option buyers lose money mainly because of time decay, trading on expiry day, overtrading, and entering trades without a stop loss or position sizing. Options accounted for 92% of retail F&O losses in FY26.
Did SEBI’s new F&O rules reduce losses?
Total losses fell by about 18% in FY26, but mainly because around 20% fewer people traded. The share of traders losing money improved only slightly.
Should beginners trade futures and options?
Beginners should first learn stock market basics, technical analysis, and risk management, and practise with paper trading. F&O should come only after that foundation is in place.
Which course should I take before trading options?
Start with a foundation program like the Diploma in Stock Market or a Technical Analysis course. Then move to a dedicated option trading course that covers option pricing, Greeks, and risk management.
Start Learning the Right Way
The SEBI F&O study isn’t meant to scare you away from the stock market. It shows you what not to do. The traders who last are the ones who treat trading as a skill to be learned, not a shortcut to quick money.
If you want to learn the stock market with a risk-first, practical approach, visit our Dadar, Thane or Vasai branch or call +91 99304 40999 to book a free counselling session. You can also read about our admission process to get started.
Disclaimer: This article is for educational purposes only and is not investment advice or a recommendation to buy or sell any security. Trading in futures and options involves substantial risk of loss. Data in this article is sourced from SEBI’s study “Profitability of Individual Traders in the Equity Derivatives Segment (FY25–FY26)”. Upside Stock Market Training Institute does not provide stock tips or guaranteed returns.