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Most retail traders in Indian F&O lose money. Trading in futures, options and commodity derivatives can cause losses larger than you expect. SEBI's own studies of individual F&O traders have found that roughly 9 in 10 made net losses. Please read this before using any SMD analytics.
Key risks
- Leverage. Small price moves can create large losses relative to the margin you put up. Option sellers can face losses well beyond the premium received.
- Option buyers. Options lose value with time (theta decay). Most out-of-the-money options expire worthless, especially on expiry day.
- Volatility and gaps. Prices can jump on news, results, global events or overnight, skipping past stop-losses.
- Liquidity. Some strikes, stock options and commodity contracts trade thinly, causing wide spreads and slippage.
- Commodities. MCX contracts are affected by global prices, currency moves, inventory data and physical delivery rules.
- Model risk. Greeks, gamma exposure, VPIN, max pain, SABR surfaces, harmonic patterns and composite scores are mathematical estimates built on assumptions. They can be wrong, and a pattern or level that held in the past may fail.
- Data and technology. Feeds, brokers, internet connections and our own systems can be delayed, interrupted or produce errors. Alerts may arrive late or not at all.
- Algo and automated orders. Automated strategies can multiply errors quickly. Monitor every automated order and use broker-level risk limits.
- Costs. Brokerage, STT, exchange charges, GST and stamp duty reduce returns, especially for frequent intraday trading.
Before you trade
Only trade with money you can afford to lose. Past performance, backtests and paper-trading results do not guarantee future results. Consider consulting a SEBI-registered investment adviser before trading.