A recent study by Sebi found 88% or 9 out of 10 individual F&O traders still incurred losses in FY26. Options remained the main source of losses.

The market regulator said around 92% of aggregate losses incurred by individual traders came from options trading. The market regulator, as well as the government, has been advising investors to tread with caution in the derivatives market, which wiped off massive sums of retail investors’ wealth.

This may remind investors of what Warren Buffett once said. ”“In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal,” he wrote.

Being ahead of time, as always, the Berkshire Hathaway Chairman wrote in the 2002 letter, “The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear.” His warnings came true during the 2008 financial crisis, when complex derivatives originally designed to protect banks from deadbeat borrowers added to their turmoil.

Buffett has reiterated his warnings against F&O several times. He recently criticized the current stock market environment, highlighting that value investing is fizzling out as people prefer gambling instead.

" It is tough to find values when everybody is preferring gambling," the 95-year-old legendary investor said in an interview to CNBC." “We are touching only the futures and options segment.

No one has increased transaction costs elsewhere. Speculation, what we call ‘satta’ in Hindi, is highly risky, and many people with limited funds face heavy losses.

The nominal increase in STT is aimed purely at deterring excessive speculation. We respect market activity, but the government cannot ignore the losses faced by small investors.

This tax is only one element to support that policy. How the rest of the market is regulated is up to the market regulator,” Sitharaman said in a statement to the press after her Budget speech.

To curb the derivatives frenzy, the government increased STT on F&O trading. As a result, some reduction in F&O volumes were noticed.

12 lakh crore in FY25. The fall in total losses came mainly because the number of active individual traders declined, not because outcomes improved meaningfully for those who continued trading.