SEBI’s Latest F&O Report: What the Data Reveals About How India Trades Options

India's equity derivatives market has changed significantly over the last few years. Retail participation expanded rapidly, index options became the dominant product, and short-duration contracts—particularly those approaching expiry—came to represent a substantial share of trading activity.

SEBI's latest study, Profitability of Individual Traders in the Equity Derivatives Segment (FY25–FY26), provides a detailed look at what this market now looks like.

The report examines participation, turnover, profitability, transaction costs, demographics, portfolio sizes and trading behaviour across India's equity derivatives segment. Its findings are particularly relevant for anyone trying to understand the structure of India's options market beyond individual profit-and-loss stories.

The headline statistic will understandably receive attention: 87.7% of individual traders in the equity derivatives segment were loss-makers in FY26.

However, the broader data tells a more complex story.

Participation has declined. New trader entry has slowed. Yet options continue to dominate retail derivatives activity, trading remains heavily concentrated in contracts close to expiry, and transaction costs continue to represent a significant part of the overall trading equation.

The central question, therefore, is not simply whether individual traders made or lost money.

It is:

What does SEBI's data reveal about how India is actually trading options?

1. Retail Participation Has Declined, but Options Continue to Dominate

FY26 marked an important shift in the growth trajectory of India's equity derivatives market.

According to SEBI, the number of active individual traders in the equity derivatives segment declined by approximately 18% year-on-year, falling from 106.2 lakh traders in FY25 to 87.5 lakh in FY26.

This was the first year-on-year decline in the individual trader base after several years of rapid expansion.

New trader entry also slowed significantly. Around 20.8 lakh first-time traders entered the equity derivatives segment in FY26, compared with 34.3 lakh in FY25 and a peak of 43.1 lakh in FY24.

At the same time, the number of traders exiting the segment increased sharply. Nearly 46 lakh traders who participated in FY25 did not trade in FY26.

These numbers indicate a clear moderation in participation.

However, the decline should not be interpreted as a complete reversal of the growth seen after FY21. The FY26 trader base remained substantially larger than the levels seen before the rapid expansion of retail derivatives participation.

More importantly, the structure of participation remains heavily concentrated in options.

SEBI found that:

• 99.3% of individual traders in the equity derivatives segment traded options at least once.
• 93% traded only options.
• Only 6.6% traded futures at least once during FY26.
• Less than 1% of individual traders traded only futures.

This is an important structural observation.

When we discuss the growth of retail derivatives trading in India, we are increasingly discussing the growth of retail options trading, particularly index options.

2. India's Retail Derivatives Market Is Increasingly an Index Options Market

The shift towards index options has been visible for several years, and SEBI's latest data shows that the trend remains firmly in place.

Within the options segment for individual traders, the share of index options in turnover increased from 81% in FY22 Q1 to 94% in FY26 Q4.

Over the same period, the share of stock options declined from 19% to 6%.

This means that the growth of retail derivatives participation has not been evenly distributed across products.

It has become increasingly concentrated in index-based options.

SEBI also notes that index options remained the largest and most resilient part of the equity derivatives market even as overall growth moderated.

In FY26:

• Index options premium turnover grew by 9%.
• Index futures turnover declined by 16%.
• Stock futures turnover declined by 15%.
• Stock options turnover declined by 10%.

Index options accounted for 91% of options activity in FY26.

This structural concentration matters because different derivatives products behave differently.

A trader who understands stock options, index options, futures or longer-dated contracts as if they are interchangeable is unlikely to fully understand the risks associated with each product.

Liquidity, time to expiry, volatility behaviour, position sizing, margin requirements and intraday price movement can all affect how a particular strategy behaves.

The first lesson from SEBI's data is therefore straightforward:

Understanding "options trading" in general is not enough. Traders increasingly need to understand the specific market structure of the products they are trading.

3. A Large Share of Options Trading Still Happens Close to Expiry

Perhaps one of the most significant findings in the report relates to the concentration of trading activity around expiry.

In FY25, SEBI found that:

• 70% of index options turnover occurred on the expiry day itself, or 0DTE.
• 80% occurred within one day to expiry.
• 98% occurred in contracts with seven days or less remaining to expiry.

Following regulatory measures introduced by SEBI, this concentration moderated to some extent in FY26.

However, short-duration contracts continued to dominate activity:

• 59% of turnover occurred on 0DTE.
• 75% occurred within one day to expiry.
• 97% occurred within seven days to expiry.

Longer-dated contracts represented only a small share of total trading activity.

This is an important observation because an option contract is not defined only by whether it is a call or a put.

Time to expiry materially changes the behaviour of an option.

As expiry approaches, the relationship between the underlying price, time value and option sensitivity can change rapidly. The characteristics of a position held several weeks before expiry may therefore be very different from those of a position initiated and managed on expiry day.

This does not mean that short-duration or expiry-day trading is inherently unsuitable.

However, it does mean that traders should understand the specific conditions under which they are operating.

A strategy should not be evaluated only by its theoretical payoff diagram.

It should also be evaluated in the context of:

• Time remaining to expiry.
• Volatility conditions.
• Expected market movement.
• Liquidity.
• Position size.
• Maximum defined risk.
• Margin and capital requirements.
• Execution and adjustment rules.

The concentration of activity in near-expiry contracts suggests that these considerations are becoming increasingly important to the modern Indian options trader.

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4. Fewer Traders Does Not Automatically Mean Better Outcomes

One of the more interesting aspects of the report is the relationship between declining participation and trader outcomes.

Aggregate net losses for individual traders declined from a revised ₹1.12 lakh crore in FY25 to ₹91,685 crore in FY26.

At first glance, this may appear to suggest an improvement.

However, the number of active traders also declined.

SEBI found that the average loss per individual increased slightly, from approximately ₹1.13 lakh in FY25 to ₹1.17 lakh in FY26.

The percentage of loss-making individuals declined from 90.9% to 87.7%, but the overall incidence of losses remained high.

SEBI also reported that the average loss among loss-makers was approximately ₹1.47 lakh, compared with an average profit of approximately ₹1.22 lakh among profit-makers.

This distinction is important.

A reduction in aggregate losses does not automatically mean that trading outcomes have improved for every participant. Changes in participation can alter the composition of the trader base.

SEBI's report also observed that the decline in participation was more pronounced among smaller or less-active traders, while the remaining index derivatives traders showed higher average turnover per trader.

The data therefore provides an important reminder:

A smaller number of market participants does not necessarily mean that the remaining participants are taking less risk.

Participation and risk are not the same thing.

The number of trades, turnover generated and notional exposure taken by an individual trader can matter just as much as the number of people participating in the market.

5. Turnover Is Not the Same as Capital

One of the most relevant findings for individual traders concerns the relationship between portfolio size and derivatives activity.

SEBI examined the equity portfolios of derivatives traders and found that a significant proportion had relatively small underlying equity holdings.

Out of approximately 122.6 lakh traders who participated during FY25 and FY26:

• Around 43 lakh traders, or 35%, had no underlying equity portfolio at the end of FY26.
• Around 95 lakh traders, or 78%, had equity portfolios below ₹1 lakh.
• This group accounted for approximately 51% of turnover but 70% of total losses during FY25–FY26.

Another finding is particularly notable.

Traders with equity portfolios below ₹1 lakh and derivatives turnover above ₹1 crore represented approximately 13% of traders but accounted for 52% of aggregate losses.

These figures should not be interpreted to mean that portfolio size alone determines whether a trader will be profitable.

SEBI's analysis is descriptive and does not establish cause-and-effect relationships between trader characteristics and outcomes.

Nevertheless, the data highlights an important distinction that every derivatives trader should understand:

Trading turnover is not the same as financial capacity.

A trader can generate a large amount of turnover relative to the capital or assets available to absorb risk.

This is particularly relevant in derivatives, where leverage and notional exposure can make activity appear much larger than the trader's underlying capital base.

A structured trading process should therefore begin with questions such as:

• How much capital is allocated to trading?
• How much risk can be taken on a single position?
• What is the maximum acceptable loss?
• How much exposure is being taken relative to available capital?
• How does the strategy behave during adverse market conditions?

Without this framework, turnover can become a measure of activity rather than a measure of progress.

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6. Transaction Costs Remain a Major Part of the Trading Equation

Gross trading profit and net profitability are not the same thing.

SEBI's data provides a useful illustration of why transaction costs should be considered as part of the trading process rather than as an afterthought.

Individual traders incurred approximately ₹25,000 crore in transaction costs in FY25 and again in FY26, despite a decline in premium derivatives turnover during FY26.

Over the FY22–FY26 period, cumulative transaction costs for individuals in the equity derivatives segment amounted to approximately ₹1 lakh crore.

SEBI also found that the composition of these costs has changed over time.

The amount of Securities Transaction Tax paid by individual traders increased from approximately ₹4,920 crore in FY25 to ₹6,645 crore in FY26, an increase of 35%.

Over FY22–FY26, individual traders paid more than ₹18,500 crore in STT.

For an individual trader, the practical lesson is simple:

A trading system should be evaluated after costs, not before them.

This becomes particularly important when a strategy involves:

• High trading frequency.
• Frequent entries and exits.
• Multiple adjustments.
• Repeated intraday trading.
• Small expected profits relative to transaction costs.

A strategy that appears profitable on a gross basis may produce a significantly different outcome after brokerage, statutory levies, exchange charges and other transaction costs are considered.

For this reason, traders should periodically evaluate not only their P&L but also their turnover efficiency.

Useful questions include:

• How much turnover is required to generate the current level of returns or losses?
• How much of gross profitability is being consumed by transaction costs?
• Is higher trading frequency improving the trading process?
• Are adjustments reducing risk, or simply increasing costs and complexity?

More activity does not automatically create a better trading process.

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7. The Data Also Shows Who Is Participating in the Market

SEBI's report highlights the demographic expansion of derivatives trading.

Traders below the age of 30 accounted for 43% of all individual equity derivatives traders in FY26, up from 31% in FY22.

The report found that 89% of traders below 30 were loss-makers in FY26, compared with 81% among traders above 60.

The data also showed significant participation from lower-income categories.

Approximately three-fourths of individual derivatives traders fell within the below-₹5 lakh annual income category.

This group accounted for:

• 43% of turnover.
• 53% of aggregate losses.

Again, these figures should be interpreted carefully. Demographic characteristics alone do not establish why a particular individual makes or loses money.

However, the broader trend is clear.

Financial market access has expanded rapidly.

Trading applications, digital onboarding and lower barriers to market participation have made derivatives accessible to a much wider group of individuals than in previous market cycles.

But access and preparedness are not the same thing.

Opening a trading account provides access to a market.

It does not automatically provide:

• An understanding of derivatives.
• A tested strategy.
• A position-sizing framework.
• Risk-management rules.
• The ability to manage adverse market conditions.
• A process for evaluating performance over time.

As market participation becomes easier, the importance of structured education and disciplined risk management becomes greater.

8. What Changed After SEBI's Recent Measures?

SEBI introduced a series of measures during FY25 and FY26 aimed at strengthening risk management in the equity derivatives segment.

These included changes relating to weekly derivative contracts, contract sizes, upfront collection of options premium, expiry-day margin treatment and other risk-management measures.

The Government also increased the Securities Transaction Tax applicable to equity derivatives from October 2024.

SEBI's report observed a significant decline in participation following these changes, particularly in index options.

Between Q2 and Q4 of FY25:

• Options participation declined by 25.8%.
• Futures participation declined by 16.7%.
• Index options participation declined by 26.8%.

However, the report also observed that average turnover per remaining trader increased in certain index derivatives products.

Index options turnover per trader increased by 12%, while index futures turnover per trader increased by 20%.

Premium turnover in index options initially declined following the implementation of the measures but subsequently recovered.

This is why the impact of regulatory changes should not be reduced to a simple conclusion.

The data shows changes in participation and trading activity, but SEBI explicitly notes that its analysis is descriptive and does not establish a causal relationship between the regulatory measures and observed trading outcomes.

The more useful interpretation is that the market is evolving.

Participation patterns are changing, but index options continue to remain the dominant area of retail derivatives activity.

What Should Individual Traders Take Away From SEBI's Latest Data?

The report should not be interpreted as evidence that every individual should avoid derivatives.

Nor does the data support the idea that a particular strategy, product or trading approach can guarantee profitability.

What the report does highlight is the importance of understanding the environment in which a trader is participating.

India's retail derivatives market is increasingly characterised by:

1. A strong concentration in options rather than futures.
2. An even stronger concentration in index options.
3. Heavy trading activity in contracts close to expiry.
4. High levels of turnover relative to the portfolio size of many participants.
5. Significant transaction costs.
6. A high incidence of loss-making outcomes among individual traders.

These observations reinforce the need for a process-based approach to trading.

A disciplined framework should include:

Understanding the Product

Before applying a strategy, traders should understand how the instrument behaves and how time, volatility and market movement can affect the position.

Defining Risk Before Entry

Risk management should not begin only after a position moves against the trader.

Position size, maximum acceptable loss and adjustment rules should be considered before entering the trade.

Evaluating Net Results

Trading performance should be measured after transaction costs rather than relying only on gross profit and loss.

Matching Strategies to Market Conditions

No strategy performs identically across every market environment.

Understanding when a strategy may be appropriate is as important as understanding how it is constructed.

Separating Activity From Process

A higher number of trades or greater turnover does not necessarily indicate greater skill, better execution or improved decision-making.

A trading process should be evaluated based on defined rules and risk-adjusted outcomes over an appropriate period.

Summary: Participation Is Easy. Process Is Harder.

SEBI's latest study provides one of the most detailed pictures yet of India's evolving retail derivatives market.

The data shows that participation has moderated after years of rapid growth. Yet the underlying structure of the market remains heavily concentrated in index options and short-duration contracts.

The report also shows that individual trading outcomes continue to be challenging, with 87.7% of individual traders classified as loss-makers in FY26.

But the broader lesson goes beyond that headline.

The data highlights the importance of understanding:

• What product is being traded.
• How close the contract is to expiry.
• How much exposure is being taken relative to available capital.
• How turnover and trading frequency affect the overall process.
• How transaction costs affect net outcomes.
• Why participation alone is not a substitute for preparation.

For traders, the objective should not be to trade more simply because opportunities appear frequently.

A more sustainable approach is to build a process around product knowledge, position sizing, risk management, strategy selection and disciplined evaluation.

In a market where access has become easier than ever, a structured process may be more important than ever.

For traders who want to build a stronger understanding of options before increasing complexity or trading activity, the focus should begin with learning how options behave, how strategies respond to different market conditions and how risk can be defined within a structured trading framework.

Source: SEBI, “Profitability of Individual Traders in the Equity Derivatives Segment (FY25–FY26),” August 2026.