87.7% of Retail F&O Traders Lost Money in FY26. So Who Made the Money?

SEBI's latest study on equity derivatives makes for some uncomfortable reading.

In FY26, 87.7% of individual F&O traders lost money. Collectively, individual traders lost ₹91,685 crore, with the average loss among loss-making traders at approximately ₹1.47 lakh. Even more striking, options accounted for 92% of the aggregate losses incurred by individual traders.

Now comes the interesting part.

F&O is essentially a zero-sum game before transaction costs. If one participant makes money, someone on the other side of the trade is losing money. After transaction costs, the overall game becomes negative-sum for participants.

So if individual traders collectively lost ₹91,685 crore, the obvious question is:

Who is making that money?

But perhaps the more important question is:

What are the winners doing differently?

Are they better at understanding probability and expected value, rather than simply predicting whether the market will go up or down?

Are they using different strategies instead of simply buying calls and puts?

Are they managing position size and risk differently?

Are they trading less frequently and waiting for higher-quality opportunities?

Are they using volatility and time decay as part of their strategy rather than focusing only on market direction?

Are they using systematic or algorithmic approaches instead of making every decision manually?

Or are they simply avoiding the behavioural mistakes that cause many retail traders to overtrade, take excessive risk and chase short-term gains?

SEBI's latest data provides another important clue.

In FY26, proprietary traders generated approximately ₹44,483 crore in gross profits, while FPIs generated approximately ₹13,896 crore in gross profits. SEBI also noted that 99% of proprietary traders' gross profits came from algo entities.

This doesn't mean every proprietary trader or FPI makes money, nor does it mean algorithms automatically produce profits.

But it does raise an interesting question:

Are retail traders really playing the same game as the participants on the other side of their trades?

Perhaps the more useful question isn't simply:

"Why do retail traders lose money in F&O?"

Perhaps it is:

"What do the winners understand, measure and do differently?"

Think.