Retail Traders Aged Below 40 Suffer Heavy Losses Trading Futures, Options: SEBI Study

Among 45.24 lakh retail traders in futures and options (F&O) in the country as of the financial year 2021-22, a paltry 11% made profits, as per a study published by the Securities and Exchange Board of India (SEBI).

What Happened: A new study by SEBI reveals that nine out of ten individual traders in the equity Futures and Options segment made net losses in the financial year 2022.

The study, titled ‘Analysis of Profit and Loss of Individual Traders dealing in Equity F&O Segment,’ looked into trade data from financial years 2019 and 2022 in a bid to analyse F&O trades before and after the global pandemic broke out. The findings from the study were based on data compiled from the top 10 brokers in the country who have the largest percentage share of individual investors' turnover within the equity F&O segment.

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In terms of participation among traders, the study found that individual traders in the equity F&O segment grew by over 500% between FY19 and FY22. There were 7.1 lakh traders during FY19, which became 45.2 lakh during FY22. Out of this, 88% are deemed active traders.

The average loss made by the 89% loss makers stood at ₹1.1 lakh during FY22, whereas the average figure for traders who recorded profits was at ₹1.5 lakh. The metric gets even more skewed as SEBI reports that the top 1% of traders who recorded profits alone accounted for nearly 51% of the total net profit.

Besides net trading losses, loss makers took an additional blow of 28% in transaction costs, SEBI noted in its research paper. Meanwhile, net profit makers had to shell out as high as 50% of their profits in transaction costs in some cases.

Major age factor at play: The study highlights that during FY22, the participation of individual traders aged between 20-30 years shot up beyond 30% from nearly 11% in FY19 while the percentage share of participation for traders aged below 20 years went up marginally too during FY22 over FY19.

In FY22, 34% of the profit makers who traded in index options were between 20-30 years of age, while traders aged above 40 years made up 26% of all profit makers.

That said, traders aged above 40 did manage to record higher sums in profit compared to their lesser-aged counterparts.

Interestingly, traders aged below 20 who made up for only 1% of the total participation made an average profit in index options during both FY19 and FY22. In contrast, individual traders from all other age groups incurred average losses during both financial years.

When it comes to futures though, the youngest among the traders also recorded the highest average losses when compared to all other age groups.

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