Small traders bear F&O losses, prop desks gain

Meanwhile, the Economic Times daily newspaper is available online now.

Key points

• How India's small F&O traders carried 70% losses while prop desks created Rs 44, 000 crore.
• While almost 78% had equity portfolios below Rs 1 lakh, the market regulator's study indicated that concerning 35% of individual equity derivatives traders had no equity holdings.
• Plenty of individual traders faced dire financial setbacks from rapid declines in short-dated options.
• Retail traders, especially those using small capital, often enter near-expiry options hoping for quick gains.
• The findings point to a derivatives market where the odds are heavily tilted against smaller traders.

Losing game! How India's small F&O traders carried 70% losses while prop desks created Rs 44, 000 crore.

Losing game! How India's small F&O traders carried 70% losses while prop desks created Rs 44, 000 crore. ETMarkets.comLast Updated: Aug 21, 2026, 09: 30: 00 AM IST.

While proprietary desks and foreign investors thrived with notable profits, in FY26, small Indian traders suffered a staggering seventy percent of the losses in the futures and options market. Plenty of individual traders faced dire financial setbacks from rapid declines in short-dated options. Meanwhile, institutional players leveraged sophisticated algorithms and trading techniques, exacerbating the inequity in the market landscape.

Retail losses in India's futures and options market were concentrated among small investors in FY26, with traders holding equity portfolios of less than Rs 1 lakh accounting for regarding 70% of aggregate losses, even as proprietary traders produced gross trading profits of around Rs 44, 000 crore, according to a new Sebi study. While almost 78% had equity portfolios below Rs 1 lakh, the market regulator's study indicated that concerning 35% of individual equity derivatives traders had no equity holdings. These small-portfolio traders contributed only regarding half of the turnover, but accounted for almost 70% of the losses.

For context, the contrast with sizeable and professional market participants was sharp. Proprietary traders recorded the highest gross trading profit at regarding Rs 44, 000 crore in FY26, followed by foreign portfolio investors at Rs 14, 000 crore, corporates at Rs 8, 000 crore, mutual funds at Rs 3, 000 crore and partnership firms or LLPs at Rs 3, 000 crore. Sebi remarked 99% of the profits produced by FPIs and proprietary traders came from algo entities. What does this mean?

In practice, the findings point to a derivatives market where the odds are heavily tilted against smaller traders. While institutional and proprietary desks operate with better systems, faster execution, deeper risk controls and algorithmic strategies, retail investors are largely buying short-dated options with limited capital. In such a setup, the small trader is not playing the same game as the sizeable market participant. Sebi's data indicated that almost 99% profits of FPIs and prop traders came from entities that employed algorithmic orders. Analysts say major institutional investors can process rate changes, spreads and volatility faster than manual traders. Live Events.

Retail traders, especially those using small capital, often enter near-expiry options hoping for quick gains. The market structure allows both to trade the same contracts, but the tools available to each side are particularly different. This does not mean every sizeable investor wins or every retail trader loses as of manipulation. While the loss pool is concentrated with individual traders with small portfolios, but the Sebi data demonstrates a clear pattern that the profit pool is concentrated with professional and institutional players.

In short, small traders bear F& O losses, prop desks gain is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.