FnO Trading - Quick money or Financial doom?
- Manan Mehta
- Nov 21
- 8 min read
The numbers are stark and undeniable. According to the latest SEBI (Securities and Exchange Board of India) research, 91% of retail traders in the equity derivatives segment lost money in FY25, collectively losing over ₹1 lakh crore.
This isn't a bad year or temporary setback. This is a structural reality: 9 out of 10 individual traders lose money in FnO trading. Yet millions continue chasing this zero-sum game, often with money they cannot afford to lose.
This comprehensive guide explains the verified data, why retail traders consistently fail, and why avoiding FnO entirely is the rational choice for most investors.
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The Verified SEBI Data: The Undeniable Numbers
FY25 Statistics (Most Recent: July 2025)
According to SEBI's official study released in July 2025:
91% of individual traders incurred net losses in the equity derivatives segment
Net losses reached ₹1.06 lakh crore (up 41% from FY24's ₹74,812 crore)
Average loss per trader: ₹1.1 lakh (up from ₹86,728 in FY24)
Number of unique retail traders: Declined 20% year-on-year but still participate despite losses
Four-Year Cumulative Data (FY22-FY25)
When you look at the complete picture:
Year | Net Losses (₹ Crores) | % Traders with Losses | Avg Loss per Trader |
FY22 | ~₹60,000 | 89% | ~₹1.2 lakh |
FY23 | ~₹66,000 | 92% | ~₹1.08 lakh |
FY24 | ~₹74,812 | 92% | ~₹86,728 |
FY25 | ~₹1,06,000 | 91% | ~₹1.1 lakh |
Total | ₹2,86,986 | 90%+ average | ~₹1.07 lakh |
Cumulative retail loss over 4 years: ₹2.87 lakh crore (~$34.4 billion)
The Categorical Breakdown: Which Traders Lose Most
New Traders (Entered F&O for first time in past 3 years):
Represented 42 lakh traders in FY24 (nearly half of all F&O participants)
92.1% incurred net losses
Average loss: ₹46,000 per trader
These are people just starting, with least experience, highest FOMO
Regular Traders (Consistently traded FY22-FY24):
Represented 25% of total F&O participants
88% suffered net losses despite 3+ years experience
Average loss: ₹1.50 lakh per person
Key insight: Experience does NOT translate to profitability
Worst-Hit Traders (Top 3.5% loss-makers):
Approximately 4 lakh traders
Average loss: ₹28 lakh each over three years
These are people whose financial lives were destroyed
Profitable Traders (Only 1%):
Just 1% of traders made profits exceeding ₹1 lakh after transaction costs
That's roughly 1 in 100 traders who made meaningful profits
This is worse than coin-flip odds
If you want someone to assist you with your investments, feel free to contact us. Our team of experts will be happy to help. You can also email us at help@reymanwealth.com
The Contrast: Who Actually Makes Money in FnO
While retail traders bleed money, institutional players make extraordinary profits:
Participant Type | FY24 Gross Profits | % Via Algo Trading | Success Rate |
Proprietary Traders | ₹33,000 crore | 96% | N/A |
Foreign Portfolio Investors (FPIs) | ₹28,000 crore | 97% | N/A |
Individual Retail Traders | Loss ₹74,812 crore | N/A | 8% profitable |
The brutal asymmetry:
Institutional traders make ₹33,000-28,000 crore using algorithms. Retail traders lose ₹74,812 crore using emotions.
The algorithm advantage:
96-97% of institutional profits come from algorithmic trading (computers making decisions).
Why Retail Traders Consistently Lose: The Structural Reasons
Reason 1: FnO Is a Zero-Sum Game
What this means: For every rupee you make, someone else loses a rupee. Unlike equity investing where everyone can make money together as companies grow, derivatives are pure wealth transfer.
Example:
You buy 1 Bank Nifty call option at ₹100
Market falls; option becomes worthless
You lose ₹100
The seller gains ₹100 (minus transaction costs)
Who loses most? Retail traders with limited capital, poor timing, and no information advantage.
Reason 2: Structural Leverage Disadvantage
How leverage works in FnO:
Equity: ₹1,00,000 invested = ₹1 lakh exposureFutures: ₹1,00,000 invested = ₹25-50 lakh exposure (15-50X leverage)Options: ₹1,00,000 invested = ₹1-10 lakh exposure (depending on strike)
The trap: Low margin requirements make trading feel "affordable." A ₹500 premium option feels cheap compared to buying a stock. But if market moves 2-3% against you, your entire position is wiped out.
Institutional traders' advantage: They use leverage strategically with risk management. Retail traders use leverage emotionally, magnifying losses.
Reason 3: Expiry Mechanics: Time Decay Works Against You
Critical concept: Theta Decay
Equity options lose value every single day, regardless of whether the market moves. This is called "theta decay" or "time decay".
Example:
You buy a Bank Nifty call option: Strike 40,000, Expiry 30 days
Pay ₹300 premium
Market doesn't move for 15 days
Option value drops to ₹200 (lost ₹100, market didn't move!)
You're bleeding money daily just by holding the option
Compounding problem: Most retail traders hold options expecting big directional moves. The theta decay erodes value daily. When the move finally happens (or doesn't), time has already destroyed half your capital.
Institutional advantage: They earn money from theta decay (they SELL options and COLLECT this premium). Retail traders pay this decay to institutions.
Reason 4: Information Asymmetry
What institutions know that you don't:
Algorithmic prediction models trained on millions of data points
High-frequency trading systems reacting to price movements microseconds before humans
Institutional flow information (knowing big orders coming)
Superior data analysis and risk modeling
Access to proprietary research
What retail traders know:
Price chart from a free trading app
Tips from Telegram groups
Social media posts from "finfluencers"
Hunches and gut feelings
The asymmetry is total. Information advantage goes to institutions exclusively.
Reason 5: Behavioral Biases: FOMO, Revenge Trading, Overconfidence
FOMO (Fear of Missing Out):
See Nifty up 5% today
Think "I'm missing gains"
Buy options on impulse
Market corrects next day
Loss locked in
Revenge Trading:
Lose ₹5 lakh in options
Devastated, want to "make it back"
Make riskier bets with remaining capital
Lose ₹3 more lakh in next trade
Average loss in FY24: ₹86,728 per trader—not from one trade but from this cycle
Overconfidence Bias:
Make one successful trade (luck)
Think you're a trading genius
Go all-in on next trade
Market moves against you
Get wiped out
93% of traders go through this cycle
Statistical reality: 75% of loss-making traders continued trading despite losing money in BOTH previous two consecutive years. That's not discipline; that's gambling addiction.
If you want someone to assist you with your investments, feel free to contact us. Our team of experts will be happy to help. You can also email us at help@reymanwealth.com
Influencer Culture: The Fuel Accelerant
What SEBI specifically warned about:
Financial influencers on YouTube, Instagram, and Telegram have created an illusion of easy profits through FnO trading.
How the influencer trap works:
Influencer shows ₹5L profit in 2 weeks (real or fake)
Followers see flashy profit screenshots
Followers think "if they can do it, I can too"
Followers start trading with money they can't afford to lose
91% of followers lose money
Influencer remains profitable from affiliate commissions on trading apps (they get paid when people sign up)
The perverse incentive: Influencer profits from MORE people trading, not from those people being profitable.
SEBI's regulatory response: New rules (2025) now restrict misleading financial promotions. Brokers cannot show fake profit screenshots or guarantee returns.
Transaction Costs: The Silent Wealth Destroyer
How transaction costs work:
Every time you trade, you pay:
Brokerage fee: ₹20-100 per trade (seems small)
STT (Securities Transaction Tax): 0.1% on each trade
Exchange charges: 0.002-0.005% per trade
Slippage: Difference between price you see and price you actually pay (~0.05-0.15%)
Total effective cost per round-trip trade: 0.15-0.30%
Why this matters:
Loss-making traders: 27% of their gross losses went to transaction costs
Profitable traders: 22% of their gross profits eaten by costs
For loss-makers: If your gross loss was ₹10,000, you paid ₹2,700 to brokers/exchanges
Net effective loss: ₹12,700
Frequency multiplier: Someone trading 2-3 times daily pays 8-15 times monthly transaction costs compared to buy-and-hold investor.
How Regulatory Changes (2025) Have Changed
SEBI introduced multiple measures:
In May 2025, SEBI implemented:
Risk Disclosure Statements: Brokers must show traders their own past losing trades
Educational Mandates: First-time traders must complete knowledge module before trading
Leverage Controls: Tighter margin requirements for retail traders
Advertising Restrictions: New rules preventing guaranteed profit claims
Result? Despite ALL these measures, FY25 showed:
91% retail traders still lost money (same as FY24)
Average losses INCREASED 41% year-over-year
Retail participation dropped only 20%, not stopped
Why regulation failed: The structural unfairness is too great. No regulatory constraint can overcome the fundamental asymmetry: 9 out of 10 traders lose to algorithms and professionals.
The Psychology: Why Traders Don't Quit
According to SEBI data:
Despite 3+ consecutive years of losses, over 75% of loss-making traders CONTINUED trading in F&O.
Why?
Gambler's fallacy: "I've lost 3 years, surely I'm due for a win"
Sunk cost fallacy: "I've already lost ₹3 lakh, one more ₹1L might get it back"
Overconfidence bias: "Those 91% are other people; I'm the 9%"
Availability bias: See influencer profit videos, not the 99 loss videos
Illusion of control: Charts, indicators, strategies create false sense of control
Brutal truth: These are the same psychological patterns that keep people gambling in casinos.
Why Equities Win, FnO Loses: The Mathematical Comparison
Scenario: ₹10,000 Initial Capital
Equity (Buy-and-Hold):
Invest ₹10,000 in Nifty 50 index fund
Expected return: 12-14% annually
20 year corpus: ~₹1.06 crore
Volatility: 18-24% (manageable)
Win rate: 70%+ probability of positive returns over 10+ years
FnO Trading:
Invest ₹10,000 as margin for options
Expected return if profitable: 50-100% per month (tempting!)
Actual result: 91% lose 90-100% of capital in first year
Volatility: 100%+ (total wipeout possible)
Win rate: 9% probability of profit over any 3-year period
The mathematics are obvious: Equity investing wins. FnO is wealth destruction.
If you want someone to assist you with your investments, feel free to contact us. Our team of experts will be happy to help. You can also email us at help@reymanwealth.com
Who Should NEVER Trade FnO
Absolute disqualifications:
Anyone with annual income <₹10 lakh: You cannot afford the losses. 92.2% of people in this bracket lost money
Anyone with <₹10 lakh emergency fund: FnO could wipe out your safety net
Anyone earning salary (not passive income): You have fixed income; can't afford speculative losses
Anyone influenced by social media: If you follow finfluencers, you're being sold a dream that profits the influencer, not you
Anyone under 40 years old: You have decades of financial runway. One F&O disaster can set back retirement by 10+ years
Anyone without formal finance education: Options pricing, greeks (delta/gamma/theta), volatility—these are complex. Without mastery, you're gambling
Anyone emotionally affected by money: If market volatility causes anxiety, F&O will destroy your mental health
Honest truth: This disqualifies 95%+ of retail traders. Yet 10+ crore people trade F&O in India.
The Only Rational Position: Avoid FnO Entirely
For retail investors, the evidence is overwhelming:
91% lose money (SEBI verified)
Average loss ₹1.1 lakh per year (SEBI verified)
Professionals make billions using algorithms; retail traders lose billions using emotions
Theta decay, leverage, and zero-sum mechanics structurally disadvantage retail
Even experienced traders lose (88% of regular traders lost money despite 3+ years experience)
Psychology keeps people trapped in losing cycle (75% continued after multiple years of losses)
The only defensible position: If you don't have >₹1 crore in liquid assets, professional trading background, and documented 5+ year track record of profitability, avoid FnO entirely.
The Profitable Alternative: Equity Investing
Instead of F&O, redirect that energy and capital to:
Diversified equity portfolio: 60-80% in mutual funds + index funds
Debt portfolio: 20-40% in fixed deposits and debt funds
Long-term compounding: 15-20 year horizon, rebalance annually
Expected return: 10-12% CAGR with 15-20% volatility (vs FnO's -90% in year 1 for 91% of traders)
The mathematics: Over 20 years, ₹10,000 monthly SIP at 12% CAGR = ₹99.9 lakh corpus.Same ₹10,000 in FnO trading = ₹0-50,000 remaining (if lucky).
Your Action Plan
This Month:
Stop all FnO trading immediately if you're currently trading
Close active derivatives positions
Redirect capital to equity mutual funds
Never:
Don't trust finfluencer promises of quick profits
Don't borrow money for F&O trading
Don't use F&O as "side income" strategy
Don't think you're the 1% that will succeed (statistically, you're not)
Conclusion: The Harsh Truth
FnO trading in India is structured in a way that benefits professional traders using algorithms and institutions using sophisticated risk models. It is deliberately designed to extract wealth from retail traders through leverage, complexity, and information asymmetry.
91% of retail traders lose money. This isn't because they're unintelligent—it's because the game itself is rigged against them.
SEBI has documented this with precision. The organization charged with protecting investors has explicitly warned against retail F&O participation.
The path to wealth is boring: Diversified portfolio, consistent SIP investing, 15-20 year horizon, annual rebalancing. It delivers 10-12% CAGR to 90%+ of investors.
The path to poverty is exciting: F&O trading with Telegram groups, social media tips, leverage, and overconfidence. It delivers -90% returns to 91% of traders.
Choose boring. Your future self will be grateful.
If you want someone to assist you with your investments, feel free to contact us. Our team of experts will be happy to help. You can also email us at help@reymanwealth.com
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