Nine out of 10 individual traders in the equity futures and options (F&O) segment incurred significant losses with the aggregate losses pegged at over Rs 1.8 lakh crore over the three-year period between FY22 and FY24, Securities and Exchange Board of India (SEBI) said on Monday.

The latest SEBI study revealed that 93 per cent of over 1 crore individual F&O traders incurred losses on an average of around Rs 2 lakh per trader, inclusive of transaction costs, during the three years from FY22 to FY24.

SEBI said the proportion of young traders (below 30 years) in the F&O segment rose to 43 per cent in FY24 from 31 per cent in FY23.

Individuals from Beyond Top 30 (B30) cities made up over 72 per cent of the total F&O trader base, a higher proportion compared to mutual fund investors wherein 62 per cent are from B30 cities, it added.

The study also revealed that in terms of the income profiles of traders, over 75 per cent of individual F&O traders in FY24 had declared an annual income of less than Rs 5 lakh.

In terms of trading behaviour and persistence, the SEBI study found that despite consecutive years of losses, more than 75 to 43 per cent in FY24 of the loss-making traders continued trading in F&O.

“With increased participation of individual investors in equity and equity derivatives markets, the current study was undertaken to analyse profit and loss patterns for individual traders in F&O during the three years FY22 to FY24, and for all the categories,” the report said.

The top 3.5 per cent of loss-makers (approx 4 lakh traders) faced an average loss of Rs 28 lakh per person over the same period, inclusive of transaction costs. Only 1 per cent of the individual traders managed to earn profits exceeding Rs 1 lakh, after adjusting for transaction costs.

This assumes significance as an earlier study published in January 2023 by the capital market watchdog had shown that 89 per cent of individual equity F&O traders lost money in FY22.

The study found that in sharp contrast, proprietary traders and foreign portfolio investors (FPIs) as a category booked gross trading profits of Rs 33,000 crore and Rs 28,000 crore, respectively, in FY24 (before accounting for transaction costs).

Individuals and others incurred a loss of over Rs 61,000 crore in FY24 (before accounting for transaction costs).

Most of the profits were generated by larger entities that used trading algorithms, with 97 per cent of FPI profits and 96 per cent of proprietary trader profits coming from algorithmic trading.

While most individual traders did not make money in the F&O segment, they ended up spending on an average an amount of Rs 26,000 per person on F&O transaction costs in FY24.

The data released by the SEBI said that over the three-year period from FY22 to FY24, individuals collectively spent about Rs 50,000 crore on transaction costs, with 51 per cent of these costs being brokerage fees and 20 per cent being exchange fees.