- A study of SEBI named Analysis of Profits & Losses in the Equity Derivatives Segment (FY22-FY24) found a little more than 91% of the individual F&O traders lost money in Fiscal 2024 alone.
- The study represented as many as 73 lakh traders in India.
- About 43% of the F&O traders were under the age of 30 in FY24.
- This was 31% in FY23. The share of loss-makers in the age group was 93%, more than the overall share of 91%.
- More than one crore futures and options (F&O) traders lost ₹1.81 lakh crore in last three years and 75000 Crore in 2024 alone.
| Aspect | Options | Futures |
| Definition and Structure | Options provide the right, but not the obligation, to buy (call) or sell (put) an asset at a specific price within a set timeframe. | Futures are standardized contracts obligating both parties to buy or sell an asset at a predetermined price and date. |
| Obligations and Rights | Buyers have the right, but not the obligation, to execute. Losses are limited to the premium paid. | Both parties are obligated to complete the transaction, exposing traders fully to market fluctuations. |
| Risk and Exposure | Risk is limited to the premium for buyers, but option sellers face higher risks and may incur unlimited losses. | Traders are fully exposed to market changes and must manage risks carefully to meet their obligations. |
| Pricing and Valuation | Influenced by factors like the underlying asset price, strike price, time to expiration, and volatility. | Pricing is based on the spot price of the underlying asset, adjusted for carrying costs (storage, interest, etc.). |
| Strategies and Use Cases | Offers flexibility with strategies from basic to complex combinations like straddles and spreads. | Primarily used for hedging and speculation with traders leveraging margin requirements. |
| Leverage | No built-in leverage, but risk is limited to the premium paid. | Futures come with built-in leverage, allowing traders to control larger positions with less capital. |
| Liquidity and Market Participation | Liquidity varies depending on the asset and market conditions, affecting ease of trading. | Generally, more liquid, especially in commodities and major indices, enabling easier entry and exit. |
Dig Deeper: Read about the concept of derivatives and their different types.
