Why Do Nearly 9 in 10 Options Traders Lose Money — and Who Wins?
Something remarkable is happening in India's stock market.
Millions of ordinary people have been trading futures and options — often called F&O in India.
But most of them are not getting rich.
On August 20, India's market regulator, the Securities and Exchange Board of India, or SEBI, released new studies examining individual traders in the equity derivatives market.
The result was brutal:
87.7% of individual traders lost money.
That's nearly 9 out of every 10 traders.
And during the fiscal year ending March 2026, individual traders collectively recorded net losses of about:
₹916.85 billion
That's roughly:
US$9.6 billion.
Millions of people trading.
Almost nine out of ten losing.
Nearly $10 billion in net losses.
That raises a very simple question:
If so many individual traders are losing money, who is winning?
The answer reveals something much bigger about modern financial markets.
First: What Is an Option?
Options sound complicated.
The basic idea doesn't have to be.
Imagine a stock is worth $100 today.
You believe it will rise sharply soon.
Instead of buying the stock itself, you buy a contract that can become much more valuable if your prediction is correct.
That's an option.
The attraction is obvious:
A relatively small amount of money can create exposure to a much larger price movement.
If you're right, your percentage gain can be huge.
But there's a problem.
An option has something an ordinary stock doesn't:
An expiration date.
Think of it like milk in a refrigerator.
A stock can usually sit there.
An option has a clock ticking.
You don't just have to guess:
Will the market go up or down?
You may also need to be right about:
how far it moves
and
how quickly it happens.
You can even be correct about the eventual direction and still lose money if the move happens too late or isn't large enough.
That's one reason options can be much harder than they first appear.
India Has Become an Extraordinary Options Market
India is especially interesting because individual investors play an unusually large role in its derivatives market.
Retail investors account for more than 35% of derivatives trading activity in India, according to NSE data cited by Reuters.
For comparison, retail participation is around one-fifth in the United States, where professional and institutional investors dominate more of the market.
India's regulators have been trying to reduce excessive speculation after individual traders suffered losses for years.
SEBI has increased contract sizes, reduced the number of weekly index expiries and introduced other measures designed to curb highly speculative trading.
And participation has started falling.
About:
4.6 million traders
who participated in India's equity derivatives market in FY2025 did not return in FY2026.
A year earlier, the number leaving had been about 2.6 million.
Yet the losses remain enormous.
Now Follow the Money
Here's where the story becomes interesting.
Individual traders collectively recorded:
₹916.85 billion in net losses
in FY2026.
Using an exchange rate of roughly ₹95.7 per U.S. dollar, that's approximately:
$9.6 billion.
But that does not mean one giant company collected $9.6 billion.
The derivatives market has many participants.
Individual traders.
Professional trading firms.
Foreign investors.
Market makers.
Brokers.
Exchanges.
And the government.
Money can move between them in different ways.
So we need to separate two questions:
Who wins trades?
and
Who gets paid because trades happen?
They are not the same thing.
Professional Traders Were on the Other Side of the Story
SEBI's latest data gives us an important clue.
In FY2026, proprietary trading firms — companies trading with their own money — recorded gross trading profits of about:
₹440 billion
or roughly:
$4.6 billion.
Foreign portfolio investors recorded another:
₹140 billion
or roughly:
$1.5 billion
in gross trading profits.
And then comes perhaps the most striking number in the study:
99%.
SEBI said 99% of the profits generated by proprietary traders and foreign portfolio investors came from algorithmic trading entities.
Think about what that means.
On one side of the market might be an ordinary person sitting at home:
Phone
↓
Trading app
↓
Buy
On other parts of the market are participants using:
algorithms
large amounts of capital
professional traders
data
and
automated systems.
That doesn't mean every algorithm wins.
And it doesn't mean algorithms simply “take” money directly from retail traders.
But it does show how different the participants in the same market can be.
The ₹916 Billion Didn't Simply Become ₹916 Billion of Professional Profit
This distinction matters.
It would be tempting to say:
Retail traders lost $9.6 billion, so professional traders made $9.6 billion.
That's too simple.
The figures are calculated differently.
The ₹916.85 billion figure is aggregate net losses for individual traders.
The ₹440 billion and ₹140 billion figures are gross trading profits reported for proprietary traders and foreign portfolio investors.
There are also trading costs and other market participants.
So these numbers should not be added together as though every lost rupee can be traced directly from one retail account into one professional firm's account.
The real system is more complicated.
But the broad pattern is difficult to ignore:
Most individual traders lost.
Meanwhile, major professional trading groups generated substantial trading profits.
Some Businesses Can Make Money Even When You Don't
There is another layer.
Imagine two traders.
One wins.
One loses.
But both placed trades.
That means other businesses involved in making those trades possible can still get paid.
A broker may receive trading-related fees.
An exchange can receive transaction fees.
Taxes and statutory charges can go to the government.
Other intermediaries can earn revenue from providing market infrastructure and services.
This creates an important distinction.
A professional trader generally needs successful trades to generate trading profits.
But parts of the financial infrastructure can earn revenue simply because:
people keep trading.
That's one reason trading volume itself is valuable.
The more frequently people buy and sell, the more activity passes through the financial system.
And Indians Are Trading Very Close to Expiration
Another SEBI number helps explain how speculative parts of this market have become.
In FY2026:
59% of index-options turnover happened on the expiration day itself.
And about:
75% occurred within one day of expiration.
Remember our milk example?
The option is now about to expire.
Its clock is almost at zero.
At that point, its price can react extremely quickly to movements in the underlying index.
For many traders, this isn't:
“I think Indian companies will become more valuable over the next five years.”
It's much closer to:
“Where will the market move today?”
That is a very different kind of activity.
Why Do People Keep Doing It?
Because the reward can look enormous.
Imagine someone posts this online:
I made 300% today.
That's exciting.
Nobody needs a finance degree to understand it.
Put in $100.
Come out with $400.
But social media has a problem.
The person who loses $100 isn't necessarily posting:
I lost everything today.
So the spectacular winners become extremely visible.
The ordinary losers can disappear quietly.
And options make those spectacular outcomes possible precisely because they can provide powerful leverage and short-term exposure.
The same feature that makes them exciting can make them dangerous.
This Isn't Really Just an India Story
India gives us unusually good data.
But the larger question is global.
Options trading has become easier for ordinary people in many countries.
A person no longer needs to call a stockbroker.
They can open an app.
Find an option.
Press a button.
And enter a market containing some of the world's most sophisticated financial participants.
That technological change is extraordinary.
Access has become easier.
But the market itself hasn't necessarily become easier to beat.
That's an important difference.
So Who Wins When Retail Traders Lose?
There isn't one winner.
Some losses become trading gains for other market participants.
Professional proprietary firms can make money.
Foreign institutional investors can make money.
Other individual traders can sometimes make money.
Meanwhile, brokers, exchanges and governments can receive fees or taxes associated with trading activity.
And sometimes almost everyone in a particular group can have a bad period.
Markets aren't a machine that automatically transfers every dollar from “retail” to “Wall Street.”
But India's latest numbers show something difficult to dismiss.
Individual traders:
87.7% lost money.
Aggregate individual net losses:
₹916.85 billion — about $9.6 billion.
Proprietary traders:
₹440 billion — about $4.6 billion in gross trading profit.
Foreign portfolio investors:
₹140 billion — about $1.5 billion in gross trading profit.
Share of those professional profits generated by algorithmic entities:
99%.
Those numbers don't prove that machines simply took money from humans.
But they do show something important about the modern market.
Trading Became Easier. Winning Didn't.
Twenty years ago, entering a sophisticated derivatives market required much more friction.
Today it can take a few taps.
That's progress.
But removing the friction from entering a market does not remove the difficulty of competing inside it.
The screen may look simple.
BUY
SELL
Two buttons.
Behind those buttons can sit algorithms, professional firms, institutional capital, exchanges, brokers and millions of other traders.
India's latest data gives us a rare look at what happens when millions of ordinary people enter that system.
Almost nine out of ten lost money.
And that's perhaps the most important lesson.
The easiest part of modern trading may be entering the trade.
Winning it is something else entirely.
BEYOND THE OBVIOUS.
Sources
SEBI — Study: Profitability of Individual Traders in the Equity Derivatives Segment (FY25–FY26)
The official August 20, 2026 study from India's securities regulator examining individual-trader profitability.
Read the SEBI profitability study
SEBI — Study: Trading Behaviour of Individual Traders in the Equity Derivatives Segment (FY25–FY26)
SEBI's companion study examining how individuals are trading derivatives.
Read the SEBI trading-behaviour study
Reuters — India Equity Derivatives Traders Fall, Total Losses Decline in FY26
Reporting on SEBI's findings, including the 87.7% loss rate, ₹916.85 billion individual net loss, professional trading profits, algorithmic trading and expiration-day activity.
Reuters — India Regulator Bets on Trading Reforms
Background on India's derivatives market, retail participation and SEBI's effort to reshape the market.