F&O was meant for hedging, not hoping, veteran investor Vijay Kedia recently posted on social media. In just a few words, he laid bare a brewing crisis in Indian financial markets — the alarming surge in retail participation in Futures & Options, not as a hedging tool, but as a high-stakes gamble.
With over 90% of retail traders reportedly losing money in F&O, the derivatives segment — designed for risk mitigation — is now beginning to resemble a digital casino.
“F&O was meant for hedging, not hoping — but retail’s turning the market into a casino.
Maybe it’s time we ask: should access come with a license, not just a login? Over 90% of retail traders lose money in F&O. This isn’t risk management — it’s just gambling, masked as strategy. We may call it a hedge, but the data calls it a warning,” Kedia wrote in a post on X.
From Strategy to Speculation
Futures and Options were originally introduced as hedging instruments — to protect portfolios against market volatility. Institutional players still use them that way. But for retail investors, the use case has increasingly drifted toward naked speculation.
Data from SEBI reveals that 9 out of 10 individual traders in the F&O segment incur net losses, and the average loss per trader is approximately ₹1.1 lakh annually. This isn’t risk management — it’s mismanagement.
As Vijay Kedia puts it, “We may call it a hedge, but the data calls it a warning.”
Should Access Be Regulated?
Kedia’s tweet provocatively asks whether access to F&O trading should require more than just a login — perhaps even a license.
It’s not without precedent. In some markets, regulatory bodies impose restrictions on who can trade derivatives, based on net worth, experience, or passing a certification exam.
In India, SEBI has been contemplating tighter rules:
– Mandating risk disclosures and educational material before allowing derivatives trading.
– Considering net worth thresholds or trading limits.
– Asking brokers to highlight losses prominently, not just gains.
While critics argue this may curtail market freedom, others believe it’s a necessary guardrail in a rapidly democratizing financial landscape.
Hope vs. Hedge
Retail investors are the backbone of a mature, inclusive market — but only when empowered with education and protected from systemic risk. If derivatives trading continues to drift into the realm of hope and hype, the fallout could hurt not just individuals, but market integrity itself.
F&O was never meant to be a lottery. It’s time we remembered that.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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