88 per cent of individual traders lost money during FY26.
Until we recognise gambling dressed up as option buying for what it is, we will keep treating the wrong disease, asserts Harsh Roongta.
Key Points
- Sebi says 97 per cent of individual traders are primarily or exclusively buying options.
- Repeated option buying and chasing losses can resemble patterns associated with gambling addiction.
- A market-wide self-exclusion system could help traders block themselves from option buying across brokers.
- Stricter finfluencer rules and stronger warnings could add friction before traders begin buying options.
Kiran, a Gen Z employee in a junior operations job, was drawn to option buying by a social media 'educator' who made it look like a low-risk way to make quick money.
He soon lost money. But instead of stopping, he traded more to recover his losses. His trades kept getting bigger.
He borrowed money to continue and eventually got so deeply into debt that his parents had to sell family jewellery to bail him out.
Kiran's story is not unusual. A Securities and Exchange Board of India (Sebi) study released in August 2026 shows 97 per cent of individual traders are primarily or exclusively option buyers.
Many continued trading after losses, hoping to recover them. Overall, 88 per cent of individual traders lost money. Three out of four individual traders had declared income below Rs 5 lakh, and this group alone accounted for over half of all losses -- around Rs 50,000 crore in FY26.
Proprietary firms made Rs 44,000 crore and foreign portfolio investors (FPIs) made another Rs 14,000 crore.
Much of the trading on the other side is algorithmic, using infrastructure no individual can match. An individual trader with a phone app is bringing a knife to a gunfight.
Calling the problem 'Futures and Options (F&O) losses' is too broad. Futures traders, option sellers and option buyers do not face the same risks.
If most individual losses come from repeatedly buying options, measures aimed at F&O as a whole may miss the real problem.
Option buying attracts people like Kiran for a simple reason: You know the most you can lose upfront.
'I paid X. X is all I can lose. Now I just wait to see if I win.'
That feels safe and makes it easier to try again after a loss. It works exactly like a lottery: People know the odds are against them but still chase the chance of a big win.
The difference is that option buying looks smarter. Trading apps make it quick and exciting, while terms like theta, time decay and option chains make it sound sophisticated.
Even Sebi's warning that 90 per cent lose money can become aspirational: 'I will be among the 10 per cent who make money.'
Option Buying Addiction Needs New Solutions
When Kiran keeps buying options to recover past losses, increases the amount after losing, borrows to continue and still cannot stop, it starts looking less like a bad investment decision and more like gambling addiction.
That changes the solution too. F&O-wide restrictions may not address the real problem.
If the problem is repeated option buying and chasing losses, some of the answers may lie in the way gambling addiction is tackled.
The United Kingdom's GAMSTOP lets anyone worried about their gambling habit block themselves from every licensed operator for a period they choose.
Some Indian brokers already offer a 'kill switch' for options trading, but it lasts only 12 hours and works only on that broker's app.
Sebi could build on this existing kill-switch infrastructure and create a market-wide system across all brokers, allowing an individual to block themselves from option buying across the market for a much longer period.
GAMSTOP is supported by GamCare, which provides counselling and other help. India could create a similar industry-funded but independently run support system to counsel addicted individuals and their families.
Sebi could add friction before a first-time trader starts buying options -- a cooling-off period, a simple test, or extra checks.
Graphic warnings could replace easy-to-ignore text warnings. Rules against finfluencers promising easy, low-risk profits need stricter enforcement.
Truth be told, Kiran still buys options today because it energises him and he remains convinced he can recover his losses.
His parents, who bailed him out once, do not know he is still trading. Kiran is not failing at investing.
He is gambling -- only the slot machine is dressed up to look like a Bloomberg terminal, and the other side includes proprietary firms and FPIs with far greater resources and technology.
Until we recognise gambling dressed up as option buying for what it is, we will keep treating the wrong disease.
Harsh Roongta heads Fee-Only Investment Advisors LLP, a Sebi-registered investment advisor
Feature Presentation: Aslam Hunani/Rediff
