87.7% of F&O traders lost money in FY26 despite SEBI curbs: Why retail investors keep losing

Nearly nine out of 10 individual futures and options (F&O) traders suffered losses in FY26 despite regulatory measures aimed at curbing excessive speculation. A new Securities and Exchange Board of India (SEBI) study reveals an even more troubling trend: trading experience does not necessarily improve profitability, with losses becoming increasingly persistent among long-term participants.

According to figures cited by Rahul Ghose, Founder and CEO of Octanom Tech, 87.7% of individual derivatives traders incurred net losses in FY26, with aggregate losses reaching ₹91,685 crore.

Why experience isn't helping traders

SEBI's study, Trading Behaviour of Individual Traders in the Equity Derivatives Segment, found that the proportion of loss-making traders increased with trading experience.

"Longer trading experience was not associated with improved outcomes," the report stated. "The share of loss-makers increased from about 91 per cent among first-year traders to over 95 per cent among traders with four or more consecutive years of participation."

Among traders active throughout FY22–FY26, 65.6% lost money every year, while just 0.5% remained profitable across all five years.

Why retail investors keep losing

Ghose attributed persistent losses to speculative trading, excessive leverage, time decay and inadequate risk management.

"Most people come into the market looking for a second income, not a long-term asset," he said.

He explained that buying inexpensive options creates an illusion of limited risk, although premiums can erode rapidly as expiry approaches.

"Retail traders are bringing emotions to a fight that's increasingly run by systems," Ghose said.

He noted that proprietary trading desks earned ₹44,000 crore in FY26, while smaller traders accounted for approximately 70% of losses.

Have SEBI's restrictions worked?

Regulatory measures have reduced participation and aggregate losses, but individual profitability remains weak.

According to Ghose, active individual derivatives traders declined from 98.1 lakh in FY25 to 78.6 lakh in FY26. Aggregate losses also decreased from approximately ₹1.12 lakh crore to ₹91,685 crore.

However, SEBI's study found that 90–92% of traders who lost money in two consecutive years suffered losses again the following year.

What should retail investors do?

Ghose emphasised that traders need structured strategies, position sizing and disciplined risk management rather than relying on market tips.

He also supported suitability assessments, including basic knowledge tests and clearer annual profit-and-loss disclosures.

SEBI's findings underline the risks: among traders who stopped participating, 86–89% had suffered losses in their final trading quarter.