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SEBI Study Confirms: F&O Trading Remains a Zero-Sum Game Where Institutions Win and Retail Investors Lose

The Securities and Exchange Board of India (SEBI) has recently released a comprehensive study on trading patterns and profitability in the equity Futures & Options (F&O) segment between FY22 and FY24. The results reinforce a critical reality of India’s markets—F&O trading is a zero-sum game, where institutional participants consistently profit at the expense of retail investors.

Over the three-year period, 93% of individual F&O traders suffered losses, with cumulative retail losses amounting to an alarming ₹1.8 lakh crore. The data leaves little room for doubt: while large institutional entities, proprietary traders, and foreign portfolio investors (FPIs) steadily accumulate profits, the retail investor base continues to absorb the losses.

A Structural Disadvantage for Retail Participants

SEBI’s findings underline how unequal the playing field is:

• Profit Concentration Among Institutions: In FY24 alone, proprietary traders and FPIs booked gross trading profits of ₹33,000 crore and ₹28,000 crore, respectively. Almost all these profits were generated through algorithmic trading—97% for FPIs and 96% for proprietary firms—leveraging speed, technology, and infrastructure that retail investors cannot access.
• Losses Concentrated Among Individuals: By contrast, individual investors and others collectively lost more than ₹61,000 crore in FY24. Average loss per trader over the three years stood at nearly ₹2 lakh, while a small segment of retail participants bore catastrophic losses of up to ₹28 lakh per person.
• Demographics of Loss-Makers: More than 75% of these retail traders reported annual incomes below ₹5 lakh, and a growing share came from younger age groups and smaller towns—segments that can least afford such losses.

This confirms that institutional dominance ensures consistent wealth transfer from retail to sophisticated players.

How F&O is Marketed to Retail Investors

The question arises: if the odds are so unfavorable, why do retail investors continue to participate?

The answer lies in the manner in which F&O products are popularized. Exchanges, brokers, and market intermediaries have a vested interest in encouraging retail participation, as transaction volumes directly translate into higher brokerage, fees, and exchange revenues.

This push is amplified by finfluencers, online “mentors,” and trading platforms that advertise unrealistic returns, often showcasing selective profits while concealing the overwhelming likelihood of losses. Retail investors are systematically led to believe that F&O trading offers a quick path to financial independence, when in reality, it functions as a mechanism to channel their money into institutional hands.

Real-World Examples of Exploitation

The dangers are not confined to market losses alone. Several cases of outright fraud and mis-selling have emerged in recent years:

• Bengaluru Case (2023): A software professional was cheated of ₹1.2 crore after joining a Telegram group that promised “guaranteed” profits from options trading. Funds transferred to so-called trading accounts were siphoned off by fraudsters.
• Delhi Case (2024): A fake stock advisory firm duped investors of nearly ₹20 crore, luring them with claims of assured high returns in derivatives trading.

Such instances highlight how the lure of extraordinary profits makes retail investors vulnerable both to market losses and criminal exploitation.

A Better Alternative: Long-Term Investing Over Short-Term Speculation

The SEBI study provides clear evidence: F&O trading is not wealth creation; it is wealth redistribution—from retail to institutional participants.

Instead of speculative trading, investors seeking sustainable wealth creation should focus on regulated, long-term investment vehicles such as mutual funds, index funds, and systematic investment plans (SIPs). These instruments are professionally managed, diversified, and designed to build wealth steadily over time rather than destroy it through leverage and speculation.

Conclusion

The recent SEBI report is a reminder that F&O trading is structurally designed to favor large, sophisticated players, while retail investors remain on the losing side. Its continued promotion among individuals—through exchanges, brokers, and finfluencers—raises serious concerns, as it not only drains personal savings but also undermines financial security for millions.

For retail investors, the message is unambiguous: stay cautious, avoid being drawn into schemes that promise extraordinary returns, and focus instead on disciplined, long-term investing.

📌 Disclaimer

Mutual fund investments are subject to market risks. Read all scheme-related documents carefully before investing. Past performance is not indicative of future returns. This article is for informational and educational purposes only and does not constitute investment advice. The content has been drafted and refined with the assistance of ChatGPT, an AI writing tool, for clarity and readability.