Chapter 2

The four lakh

Published 30 September 2026

Every average hides a distribution, and this one is hiding a massacre. Behind the "average loss of ₹2 lakh" sits a group of about 4 lakh traders whose losses are not a statistic but an event - the kind that empties accounts, breaks families, and never makes the news. The regulator counted them too. This is their chapter.

SEBI's study of every individual F&O trader between FY22 and FY24 found the loss-makers were not evenly burned. The top 3.5% of loss-makers - approximately 4 lakh traders - faced an average loss of ₹28 lakh per person over the three years, inclusive of transaction costs. Read the units again. Not ₹28,000. Twenty-eight lakh rupees, per person, on average, across a group larger than the population of most Indian district capitals. Some lost less within that band. Some lost multiples more. The average is the middle of a crater.

What ₹28 lakh is

Abstract numbers need a body. The same study records that over 75% of individual F&O traders in FY24 - 65.4 lakh people - had declared annual income below ₹5 lakh. Now place the two findings on the same page, because the regulator did. A trader in the worst-hit band lost, on average, five and a half years of the income band that three out of four of his fellow traders belong to. Not five and a half months of discretionary spending. Five and a half years of everything - rent, school fees, groceries, the works - converted into option premiums and handed to the other side of the screen.

There is no version of this loss that behaves like a bad investment. A bad mutual fund is down 20% and you curse and wait. This money does not come back, because it was never invested. It was wagered, contract by contract, against counterparties who - the same study records - were almost entirely algorithms and professional desks. The 4 lakh did not underperform the market. They were the market's revenue line.

The deeper you go, the worse it gets

The study's most quietly devastating table sorts traders by how much they traded, and the pattern breaks every assumption the marketing sells. Traders are grouped by combined option premium turnover across the three years: "small-size" below ₹1 lakh, "mid-size" between ₹1 lakh and ₹1 crore, and "high-value" above ₹1 crore. The loss rate rises with every rung: 91.5% of small traders lost, 93.8% of mid-size traders lost, and 95% of high-value traders lost.

Sit with that ordering. The people who traded the most - the committed, the experienced, the ones who survived long enough to run a crore of premium through their accounts - did worst of all. Nineteen in twenty of the heaviest players lost money. If trading skill were being sorted by experience, the curve would bend the other way. It bends toward the house, harder, the longer you stay. The only thing experience selects for in this market is exposure to the toll.

Where the 4 lakh come from

Nobody starts at ₹28 lakh down. The path there is the product working as designed: a small account, a few wins that feel like skill, position sizes that grow with confidence, and then the slow-motion math of a game where nine in ten lose and the costs run on every order whether you win or not. The study does not narrate individual journeys - it counts populations - but its numbers describe the funnel precisely. The small-size traders lose 91.5% of the time and mostly lose small. A fraction of them size up. The mid-size cohort loses more often and more. And the ones who climb to the top of the funnel, the high-value traders running crores of premium, lose at 95% - and produce the 4 lakh person crater at the top of the loss table.

This is why the ₹2 lakh average loss is the wrong number to remember. The average describes the tourist. The distribution describes the regular: the trader who came back every expiry for three years, whose account history the broker's dashboard can read like a diary, whose losses the system watched accumulate in real time - and whose only communication from that system was a notification that the next expiry was now live.

The arithmetic of the crater

Multiply the two numbers the regulator put side by side and the shape of the whole loss pool appears. Four lakh traders, ₹28 lakh each: roughly ₹1.12 lakh crore. That is arithmetic on the study's own figures - and it means the worst-hit 3.5% of losers account for around sixty paise of every rupee the entire crore-strong losing population gave up over three years. The remaining crore-odd traders share the rest. The casino's revenue is not a broad tax evenly collected. It is a concentrated extraction from a small group of people who kept playing after the losses were already life-altering, while the crowd around them churned through smaller wounds.

Every business model built on this market knows that concentration, even if it never says so. A broker's ledger does not show a crore of equal customers. It shows a long tail of small, replaceable accounts and a short head of heavy ones generating an outsized share of the order flow - the same heavy accounts the study shows losing at 95%. The system's ideal customer is not the careful newcomer. It is the person already down, sizing up to get back to even, one expiry at a time. The study gives that person a count - about 4 lakh - and an average: ₹28 lakh, gone.

The silence around the crater

When the study was published in September 2024, the ₹1.81 lakh crore headline travelled. The ₹28 lakh figure - the crater inside the headline - mostly did not. Four lakh people lost an average that would qualify as a family emergency in any income band in the country, and it merited a bullet point. There is no helpline for it, no ombudsman for "the product performed exactly as its regulator documented", no recourse for having been the liquidity. The loss is legal, disclosed, and final.

Four lakh people is a city. It is more people than live in Shimla or Pondicherry. If a single company had bankrupted a city, there would be commissions and arrests. Spread across three years and executed voluntarily, one order at a time, it is called participation. The regulator's word for it is more precise: loss-makers. The top 3.5% of them. The four lakh.